Your firm currently has $ 96 million in debt outstanding with a nbsp 9 % interest...

Your firm currently has $ 96 million in debt outstanding with a nbsp 9 % interest rate. The terms of the loan require it to repay $ 24 million of the balance each year. Suppose 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?

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Expert Solution

Solution :

The present value of the interest tax shields from this debt = $ 7,298,689.18

= 7,298,689 ( when rounded off to the nearest whole number )

Please find the attached screenshot of the excel sheet containing the detailed calculation for the solution.

jeff jeffy answered 1 year ago

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