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Legend is a firm with $250 million in assets and no debt financing. The shareholders of Legend have convinced management to lever its assets by
Legend is a firm with $250 million in assets and no debt financing. The shareholders of Legend have convinced management to lever its assets by issuing $75 million in debt at 8% interest, and using the $75 million proceeds from the debt to repurchases that same amount of equity. The corporate tax rate is 31%. How much will Legend save in taxes, per year, after the debt issue?
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