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7) Given its existing level of leverage, assume that ABC company is expecting a net income of $9.5 million next year. The cost of debt
7) Given its existing level of leverage, assume that ABC company is expecting a net income of $9.5 million next year. The cost of debt the company pays is 8 per cent. Assuming the tax rate of 30 per cent, what is the level of additional debt the ABC company can issue this year so that it can enjoy the interest tax shield benefits next year?
$201.10 million
$188.74 million
$169.64 million
$122.22 million
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