Question

Compute the present value of interest tax shields generated by these three debt issues. Consider corporate taxes only. The marginal tax rate is T_c = 0.34.

a.	A $1,500, one-year loan at 6%.(Do not round intermediate calculations. Round your answer to 2 decimal places.)

PV (tax shield)

$

b.	A five-year loan of $1,500 at 6%. Assume no principal is repaid until maturity. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

PV (tax shield)

$

c.	A $1,500 perpetuity at 5%.

PV (tax shield)

$

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