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Your firm currently has $250 million in debt outstanding with an 8% interest rate. The terms of the loan require the firm to repay $50
Your firm currently has $250 million in debt outstanding with an 8% interest rate. The terms of the loan require the firm to repay $50 million of the balance at the end of each year. In addition, interest must be paid at the end of each year. Interest is paid on the beginning-of-the year balance. Suppose that the corporate tax rate is 21% and that the interest tax shields have the same risk as the loan. What is the present value of the interest tax shields from this debt?
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