Question

Compute the present value of interest tax shields generated by these three debt issues. Consider corporate...

Compute the present value of interest tax shields generated by these three debt issues. Consider corporate taxes only. The marginal tax rate is Tc = .40.

a. A $2,400, one-year loan at 7%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value            $


b. A three-year loan of $2,400 at 7%. Assume no principal is repaid until maturity. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Present value            $

c. A $2,400 perpetuity at 6%.

Present value            $

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