You have been asked to compute the monetary value of the tax benefits from existing debt for Deutsche Steel, a German firm. The firm has 1.2 billion Euros in debt outstanding with an interest rate of 5%. The corporate tax rate for the firm is currently 30%.

What is the annual interest expense in billions?

Answer for part 1 What is the annual interest tax savings in billions?

Answer for part 2 Assuming perpetual debt, estimate the present value of tax benefits from debt in billions.

Answer for part 3