Question $6(1$ point$)$

Debt financing costs are tax deductible, so they lower the cash taxes paid. For example, if income is $$100,000$ and interest paid is $$10,000,$ taxable income is lowered to $$90,000$ The difference between cash taxes paid with and without the interest tax shield is the value of that tax shield to the firm. If the tax rate was $20\%,$ the firm would pay $$100,00020\%=$$$20,000$ before the tax shield and would only pay $$90,00020\%=$$$18,000$ with the tax deductible interest for a savings of $$2,000$ due to the tax shield.

What is the value of the tax shield if a company's debt is $$400,000,$ tax rate is $40\%,$ dividends are $$10,000,$ and the interest rate on the debt is $8\%?$

Enter all answers in dollars with no $"$ $ $"$ or $","($i$.$e$.$ $$21,400=21400)$ whole numbers are sufficient since there is a wide tolerance for numeric answers.

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