Question

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

25 %

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?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Your firm currently has$ 84 million in debt outstanding with a 10 %interest rate. The terms...
Your firm currently has$ 84 million in debt outstanding with a 10 %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 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?
Your firm currently has $108 million in debt outstanding with a 10% interest rate. The terms...
Your firm currently has $108 million in debt outstanding with a 10% interest rate. The terms of the loan require the firm to repay $27 million of the balance each year. Suppose that 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  ​(Round to two decimal​ places.)...
Braxton Enterprises currently has debt outstanding of $ 50 million and an interest rate of 8...
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​...
The Integrated Products Co. currently has debt with a market value of $280 million outstanding. The...
The Integrated Products Co. currently has debt with a market value of $280 million outstanding. The debt consists of 9 percent coupon bonds (paying semi-annually) that have a maturity of 15 years and are currently priced at $1440.03 per bond. The firm also has 12 million shares of common stock outstanding currently priced at $32.11 per share. The stock’s beta is 1.22, the market risk premium is 12.4% and T-bills yield 2.4%. If the company is subject to a 30%...
Arnell Industries has just issued $ 35$35 million in debt​ (at par). The firm will pay...
Arnell Industries has just issued $ 35$35 million in debt​ (at par). The firm will pay interest only on this debt.​ Arnell's marginal tax rate is expected to be 40 %40% for the foreseeable future. a. Suppose Arnell pays interest of 8 %8% 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 that the...
1. Braxton Enterprises currently has debt outstanding of $65 million and an interest rate of 10%....
1. Braxton Enterprises currently has debt outstanding of $65 million and an interest rate of 10%. Braxton plans to reduce its debt by repaying $13 million in principal at the end of each year for the next five years. If? Braxton's marginal corporate tax rate is 35%?, what is the interest tax shield from? Braxton's debt in each of the next five? years? 2. Pelamed Pharmaceuticals had EBIT of $273 million in 2010. In? addition, Pelamed had interest expenses of...
A company has 5.29 million common shares outstanding and $49 million of debt with an interest...
A company has 5.29 million common shares outstanding and $49 million of debt with an interest rate of 5.7%. The company wants to raise another $39.2 million. It can do so by selling an additional 2.645 million shares of common stock (the equity plan) or by taking out a bank loan with an interest rate of 7.5% (the debt plan). The company has no preferred stock. The corporate tax rate is 25%. At what level of EBIT would the company...
A company has 7.24 million common shares outstanding and $63 million of debt with an interest...
A company has 7.24 million common shares outstanding and $63 million of debt with an interest rate of 5%. The company wants to raise another $50.4 million. It can do so by selling an additional 3.62 million shares of common stock (the equity plan) or by taking out a bank loan with an interest rate of 7.6% (the debt plan). The company has no preferred stock. The corporate tax rate is 24%. At what level of EBIT would the company...
Kurz Manufacturing is currently an​ all-equity firm with 22 million shares outstanding and a stock price...
Kurz Manufacturing is currently an​ all-equity firm with 22 million shares outstanding and a stock price of $8.00 per share. Although investors currently expect Kurz to remain an​ all-equity firm, Kurz plans to announce that it will borrow $47 million and use the funds to repurchase shares. Kurz will pay interest only on this​ debt, and it has no further plans to increase or decrease the amount of debt. Kurz is subject to a 35% corporate tax rate.   a. What...
Kurz Manufacturing is currently an​ all-equity firm with 18 million shares outstanding and a stock price...
Kurz Manufacturing is currently an​ all-equity firm with 18 million shares outstanding and a stock price of $ 11.50 per share. Although investors currently expect Kurz to remain an​ all-equity firm, Kurz plans to announce that it will borrow $ 45 million and use the funds to repurchase shares. Kurz will pay interest only on this​ debt, and it has no further plans to increase or decrease the amount of debt. Kurz is subject to a 30 % corporate tax...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT