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Your firm currently has $ 80 million in debt outstanding with a 7 % interest rate. The terms of the loan require it to repay

Your firm currently has

$ 80

million in debt outstanding with a

7 %

interest rate. The terms of the loan require it to repay

$ 20

million of the balance each year. Suppose the marginal corporate tax rate is

35 %,

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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