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ella [17]
3 years ago
15

Your firm currently has $80 million in debt outstanding with a 9% interest rate. The terms of the loan require the firm to repay

$20 million of the balance each year. Suppose that the marginal corporate tax rate is 40%​,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?

Business
1 answer:
Lorico [155]3 years ago
5 0

Answer:

Present value is $ 3,193,176.52

Explanation:

The calculation of the present value of interest rate tax shield is presented in the attachment that depicts the formula sheet and the final sheet

Provided that

Current amount = $80 million

Rate of interest  = 9%

Repaid amount = $20 million

Corporate tax rate = 21%

Depend on the above information,

hence,  the present value of the tax shield is $3,193,176.52

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Hello,

Here is your answer:

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Your answer is A.

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4 0
4 years ago
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