Firm A Finn B EBIT Interest Pre tax Income Tax (35% of Income) Net Income 100 40 60 Tax 21 100 0 100 35 Pre 39 65 Firm A and B both have earnings before interest and taxes but Firm A pays out part of the profit as debt interest. a) What impact does it have on the tax of both firm? b) Recalculate the figures assuming that Firm A now has to make interest payment of $60 million. c) What happens to taxes paid? d) Does net Income fall by the additional $20 million interest payment compared to the earlier scenario where interest expense was only $40 million