Question 6

Establishment Industries borrows $880 million at an interest rate of 8.4%. Establishment will pay tax at an effective rate of 21%. What is the present value of interest tax shields if a. It expects to maintain this debt level into the far future? (Enter your answer in millions of dollars rounded to 1 decimal place.) b. It expects to repay the debt at the end of 4 years? (Do not round intermediate calculations. Enter your answer in millions of dollars rounded to 2 decimal places.) c. It expects to maintain a constant debt ratio once it borrows the $880 million and Assets = 10%? (Do not round intermediate calculations. Enter your answer in millions of dollars rounded to 1 decimal place.) a. Present value million b. Present value million Present value million