Question
Garrison's had EBIT of $10M in 2019 and expects consistent performance going forward. It is looking to optimize its capital structure by adding $50M of
Garrison's had EBIT of $10M in 2019 and expects consistent performance going forward. It is looking to optimize its capital structure by adding $50M of permanent debt. The interest rate is 5% and tax rate is 25%. What is the present value of tax shields for the firm?
n/athis erodes value as interest expense is too high and causes indirect financial distress cost
$0.625M
$12.5M
$2.5M
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Glencoe Business And Personal Finance
Authors: McGraw-Hill
1st Edition
0021400202, 9780021400201
