Assume the tax rate is 30 % and use the attached present value table if applicable to answer the below question:

 A Firm is proceeding with a bond issue to raise (borrow) $100 million. The interest rate is the cost of debt  of 8%, and interest will be paid annually for the nine (9) year term of the debt.

 If the company's tax rate  is 30%, what is the present value of the total interest tax shields of this nine-year debt?

 

Periods 4% 1 10 11 12 23 23 Periods 4 12% 9% 10% 11% 0.9174 0.9091 0.9009 0.8929 0.8116 0.7972 0.8417 0.8264 0.7513 0.7312 0.7118 0.6587 0.6355 0.7722 6 7 8 4 0.8548 0.8227 0.7921 0.7629 0.7350 0.7084 0.6830 5 0.8219 0.7835 0.7473 0.7130 0.6806 0.6499 0.6209 0.5935 0.5674 0.7903 0.7462 0.7050 0.6663 0.6302 0.5963 0.5645 0.5346 0.5066 0.7599 0.7107 0.6651 0.6227 0.5835 0.5470 0.5132 0.4817 0.4523 0.7307 0.6768 0.6274 0.5820 0.5403 0.5019 0.4665 0.4339 0.4039 0.7026 0.6446 0.5919 0.5439 0.5002 0.4604 0.4241 0.3909 0.3606 0.6756 0.6139 0.5584 0.5083 0.4632 0.4224 0.3855 0.3522 0.3220 0.6496 0.5847 0.5268 0.4751 0.4289 0.3875 0.3505 0.3173 0.2875 0.6246 0.5568 0.4970 0.4440 0.3971 0.3555 0.3186 0.2858 0.2567 9 56789112 Present Value Factors Present Value of $1 to be received after T periods: 10 Rate per period 8% 5% 0.9615 0.9524 6% 7% 0.9434 0.9346 0.9259 0.9246 0.9070 0.8900 0.8734 0.8573 0.8890 0.8638 0.8396 0.8163 0.7938 1 (1+r)T Present Value of an Ordinary Annuity of $1 per period for T periods: () (1 - 4% 5% 6% 0.9615 0.9524 0.9434 1.8594 1.8334 1.8861 2.7751 2.7232 3.6299 3.5460 4.4518 4.3295 5.2421 5.0757 6.0021 5.7864 6.7327 6.4632 7.4353 7.1078 8.1109 7.7217 8.7605 8.3064 9.3851 8.8633 (1+r)T Rate per period 7% 8% 9% 10% 11% 12% 0.9346 0.9259 0.9174 0.9091 0.9009 0.8929 1.8080 1.7833 1.7591 1.7355 1.7125 1.6901 2.6243 2.5771 2.5313 2.4869 2.4437 2.4018 3.3121 3.2397 3.1699 3.1024 3.0373 3.9927 3.8897 3.7908 3.6959 3.6048 4.6229 4.4859 4.3553 4.2305 4.1114 5.2064 5.0330 4.8684 4.7122 4.5638 5.7466 5.5348 5.3349 5.1461 4.9676 6.2469 5.9952 5.7590 5.5370 5.3282 6.7101 6.4177 6.1446 5.8892 5.6502 7.1390 6.8052 6.4951 6.2065 5.9377 7.5361 7.1607 6.8137 6.4924 6.1944 2.6730 3.4651 3.3872 4.2124 4.1002 4.9173 4.7665 5.5824 5.3893 6.2098 5.9713 6.8017 6.5152 7.3601 7.0236 7.8869 7.4987 8.3838 7.9427