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Investment bankers for Firm A suggest that they issue more debt to increase the value of the company. Specifically, the investment banker recommends issuing 10,000
Investment bankers for Firm A suggest that they issue more debt to increase the value of the company. Specifically, the investment banker recommends issuing 10,000 bonds each with 7.1% annual coupon, $1000 face value, and 8 years to maturity. The bankers believe the market will price the bonds at a YTM of 7.1%. If Firm A's tax rate is 20%, what is the expected yearly interest tax shield from this additional debt?
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