In: Finance
Suppose a project financed via an issue of debt requires five annual interest payments of $ 22 million each year. If the tax rate is 35% and the cost of debt is 5%, what is the value of the interest rate tax shield?
A.$ 26.7 million
B.$ 66.7 million
C.$ 33.3 million
D. $ 40.0 million
Solution :
The value of the interest rate tax shield = $ 33.3 million
The solution is Option C. $ 33.3 million
Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.