Question

Braxton Enterprises currently has debt outstanding of $ 50 million and an interest rate of 8 %. Braxton plans to reduce its debt by repaying $ 10 million in principal at the end of each year for the next five years. If​ Braxton's marginal corporate tax rate is 40 %​, what is the interest tax shield from​ Braxton's debt in each of the next five​ years?

The interest tax shield in year one is ​$____ million. (Round to three decimal​ places.)

The interest tax shield in year two is ​$____ million. (Round to three decimal​ places.)

The interest tax shield in year three is ​$____ million. (Round to three decimal​ places.)

The interest tax shield in year four is ​$____ million. (Round to three decimal​ places.)

The interest tax shield in year five is ​$____ million. (Round to three decimal​ places.)

Answer 1

The interest tax shield in year one is ​$_1.600___ million. (Round to three decimal​ places.) The interest tax shield in year two is ​$_1.280___ million. (Round to three decimal​ places.) The interest tax shield in year three is ​$0.960____ million. (Round to three decimal​ places.) The interest tax shield in year four is ​$_0.640___ million. (Round to three decimal​ places.) The interest tax shield in year five is ​$_0.320___ million. (Round to three decimal​ places.)				( All figure are in Million)
Year	Opening Balance	Interest 8%	TAX Shield @40%	Repayment	Closing Principal
1	$50.00	$4.00	$1.600	$10	$40.00
2	$40.00	$3.20	$1.28	$10	$30.00
3	$30.00	$2.40	$0.96	$10	$20.00
4	$20.00	$1.60	$0.64	$10	$10.00
5	$10.00	$0.80	$0.32	$10	$