Your firm currently has $ 104 million in debt outstanding with a nbsp 7 % interest...

Your firm currently has $ 104 million in debt outstanding with a nbsp 7 % interest rate. The terms of the loan require it to repay $ 26 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?

Solutions

Expert Solution

Solution :

The Present value of the interest tax shield in Year 1 = $ 2,721,495.33

The Present value of the interest tax shield in Year 2 = $ 1,907,590.18

The Present value of the interest tax shield in Year 3 = $ 1,188,529.71

The Present value of the interest tax shield in Year 4 = $ 555,387.71

The total of the present values of the Interest tax shield from Year 1 to Year 4 = $ 6,373,002.93

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

jeff jeffy answered 10 months ago

Next > < Previous

Related Solutions

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?

Your firm currently has $ 92 million in debt outstanding with a 9 % interest rate....

Your firm currently has $ 92 million in debt outstanding with a 9 % interest rate. The terms of the loan require the firm to repay $ 23 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?

Your firm currently has $ 52 million in debt outstanding with a 10 % interest rate....

Your firm currently has $ 52 million in debt outstanding with a 10 % interest rate. The terms of the loan require it to repay $ 13 million of the balance each year. Suppose the marginal corporate tax rate is 30 %，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? The present value of the interest tax shields is million. (Round to two...

Your firm currently has $ 116 million in debt outstanding with a 9 % interest rate....

Your firm currently has $ 116 million in debt outstanding with a 9 % interest rate. The terms of the loan require the firm to repay $ 29 million of the balance each year. Suppose that 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?

Your firm currently has $84 million in debt outstanding with a 8% interest rate. The terms...

Your firm currently has $84 million in debt outstanding with a 8% interest rate. The terms of the loan require the firm to repay $21 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?

Your firm currently has $116 million in debt outstanding with a 9% interest rate. The terms...

Your firm currently has $116 million in debt outstanding with a 9% interest rate. The terms of the loan require the firm to pay $29 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 shields from this debt? *****please show work*****

Your firm currently has $ 88$88 million in debt outstanding with a 9 %9% interest rate....

Your firm currently has $ 88$88 million in debt outstanding with a 9 %9% interest rate. The terms of the loan require the firm to repay $ 22$22 million of the balance each year. Suppose that the marginal corporate tax rate is 30 %30%, 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?

Arnell Industries has $ 30 million in permanent debt outstanding. The firm will pay interest only...

Arnell Industries has $ 30 million in permanent debt outstanding. The firm will pay interest only on this debt. Arnell's marginal tax rate is expected to be 30 % for the foreseeable future. a. Suppose Arnell pays interest of 9 % per year on its debt. What is its annual interest tax shield? b. What is the present value of the interest tax shield, assuming its risk is the same as the loan? c. Suppose instead the interest rate on...

Bay Transport Systems (BTS) currently has $50 million in debt outstanding. In addition to 9.0% interest

Bay Transport Systems (BTS) currently has $50 million in debt outstanding. In addition to 9.0% interest, it plans to repay 6% of the remaining balance each year. If BTS has a marginal corporate tax rate of 21%, and if the interest tax shields have the same risk as the loan, what is the present value of the interest tax shield from the debt?

Aant Investments Inc. currently has $3.5 million in debt outstanding, bearing in interest rate of 12.3%....

Aant Investments Inc. currently has $3.5 million in debt outstanding, bearing in interest rate of 12.3%. It wishes to finance a $5 million expansion program and is considering five alternatives. Plan Debt Preferred Equity 1 0% 0% 100% 2 35% 0% 65% 3 50% 0% 50% 4 50% 20% 30% 5 60% 20% 20% The preferred stock dividend will be 12% and the price of common stock will be $18 per share. The company currently has 750,000 shares of common...

Subjects