4. The income statement for E.C. Builders (ECB) is shown below. Given its marginal corporate tax rate of 35%, what is the amount of the interest tax shield for ECB in years 2010 through 2013? Calculate the present value of the tax shield, assuming that the interest rate of debt is 7%. ECB Income Statement ($M) 2010 2011 2012 2013 Total Sales 3369 3706 4077 4432 Cost of Sales -2359 -2584 -2867 -3116 Administrative Exp. -226 -248 -276 -299 Depreciation -22 -25 -27 -29 Operating income 762 849 907 988 Other income 7 8 10 12 EBIT 769 857 917 1000 Interest expense -50 -80 -100 -100 Income before tax 719 777 817 900 Taxes (35%) -252 -272 -286 -315 Net Income 467 505 531 585 5. Suppose that company A borrows $2 billion by issuing 15-year bonds. Comanche's cost of debt is 7%, and then repay the principal of $2 billion in year 15. Comanche's marginal tax rate will remain 39% throughout this period. By how much does the interest tax shield increase the value of Company A? 6. Because the probability that the Fed reduces the interest rates, there would be the option of reducing the cost of debt to 6% at the end of year 5. What would be the increase of value of Company A then?