Q3. a) MM Ltd is a British sports-fashion retail company based in Bury, Greater Manchester, England. It is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index. MM Ltd currently has 60 million in debt outstanding. In addition to 7% interest, it plans to repay 10% of the remaining balance each year. If MM Ltd has a marginal corporate tax rate of 19%, and if the interest tax shields have the same risk as the loan, what is the present value of the interest tax shield from the debt? [5 marks] Page 5 of 10 MN20211 b) AA Ltd is a major British multinational retailer with headquarters in London, England, that specialises in selling clothing, home products and food products. AA Ltd has just issued 50 million in debt (at par). The firm will pay a perpetual interest-only debt, with a 6% annual coupon. AA Ltd's marginal tax rate is expected to be 19% for the foreseeable future. AA Ltd's current cost of debt capital is 6%. What is the present value of the interest tax shield? [3 marks]