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 decimal places.)

Expert Solution

Solution :

The present value of the interest tax shields is $ 3.24 million ( When rounded off to two decimal places.)

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

jeff jeffy answered 1 year ago

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