Jade Chang is considering a new project which will allow the company to raise a new nine-year coupon bond with the face value of 8 million dollars. The coupon rate (and thus yield to maturity) is 7% and will be paid once a year. Help him find the present value of tax shield from this debt financing which can be used in the Adjusted Present Value (APV) calculation of the new project. The relevant corporate tax rate is 21%.

a.

3.65 mil $

b.

0.56 mil $

c.

0.12 mil $

d.

0.77 mil $

e.

1.68 mil $