Next you show Benjamin the impact of the investment bankers share repurchase proposal: the company could raise $10 billion new debt at the current rate of 2.1% to repurchase its own shares. current share price is 114.33.

4. Assuming the firm plans to keep this new debt outstanding forever, calculate the present value of the interest tax shield (ITS) of the new debt.

Net income (000s) Average number of shares outstanding (000s) Effective corporate tax rate Average cost of bonds 31/12/2019 8,248,500 1,267,881 36.50% (use this rate in your calculations) 2.1%