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Bay Transport Systems (BTS) currently has $60 million in debt outstanding. The interest rate is 10% and BTS plans to repay 4% of the remaining
Bay Transport Systems (BTS) currently has $60 million in debt outstanding. The interest rate is 10% and BTS plans to repay 4% of the remaining debt balance each year (At the end of this year, BTS will pay interest on $60 million and reduce the debt amount by 4%). If BTS has a corporate tax rate of 35%, and if the interest tax shields have the same risk as the loan, what is the present value of the interest tax shield from the debt
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