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QUESTION
Corporate Finance: CHAPTER 15 Debt and Taxes Your firm currently has $100 million in debt outstanding with a 10% interest rate.
Corporate Finance: CHAPTER 15 Debt and Taxes
Your firm currently has $100 million in debt outstanding with a 10% interest rate. The terms of the loan require the firm to repay $25 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?
