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In: Finance

Without​ leverage, Impi Corporation will have net income next year of $ 8.0 million. If​ Impi's...

Without​ leverage, Impi Corporation will have net income next year of $ 8.0 million. If​ Impi's corporate tax rate is 21 % and it pays 9 % interest on its​ debt, how much additional debt can Impi issue this year and still receive the benefit of the interest tax shield next​ year? (Note: Assume​ Impi's revenues exceed $ 24 ​million, and that interest tax deductions are limited to 30 % of EBIT under the​ TCJA.)

The debt is $____million.

Solutions

Expert Solution

Use spreadsheet for the ease in computations. Enter values and formulas in the spreadsheet as shown in the image below.

The obtained result is provided below.

Thus, the value of debt that could be raised is $48.22 million (rounded off).

jeff jeffy answered 6 months ago
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