Question

Establishment Industries borrows $870 million at an interest rate of 8.3%. Establishment will pay tax at...

Establishment Industries borrows $870 million at an interest rate of 8.3%. Establishment will pay tax at an effective rate of 35%. What is the present value of interest tax shields if:

a. It expects to maintain this debt level into the far future? (Enter your answer in millions of dollars.)

b. It expects to repay the debt at the end of 6 years?  (Enter your answer in millions of dollars rounded to 2 decimal places.)

c. It expects to maintain a constant debt ratio once it borrows the $870 million and rAssets = 10%? (Do not round intermediate calculations. Enter your answer in millions of dollars rounded to 1 decimal place.)

Homework Answers

Answer #1

answer to the first two questions

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Establishment Industries borrows $760 million at an interest rate of 7.2%. Establishment will pay tax at...
Establishment Industries borrows $760 million at an interest rate of 7.2%. Establishment will pay tax at an effective rate of 35%. What is the present value of interest tax shields if: a. It expects to maintain this debt level into the far future? (Enter your answer in millions of dollars.) b. It expects to repay the debt at the end of 4 years? (Enter your answer in millions of dollars rounded to 2 decimal places.) c. It expects to maintain...
Establishment Industries borrows $780 million at an interest rate of 7.4%. Establishment will pay tax at...
Establishment Industries borrows $780 million at an interest rate of 7.4%. Establishment will pay tax at an effective rate of 35%. What is the present value of interest tax shields if: a. It expects to maintain this debt level into the far future? Present value million b. It expects to repay the debt at the end of 5 years?   Present value million c. It expects to maintain a constant debt ratio once it borrows the $780 million and rAssets =...
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.)...
Milton Industries expects free cash flows of $11 million each year. Milton's corporate tax rate is...
Milton Industries expects free cash flows of $11 million each year. Milton's corporate tax rate is 22%, and its unlevered cost of capital is 14%. Milton also has outstanding debt of $21.85 million, and it expects to maintain this level of debt permanently. What is the value of Milton Industries? Express your answer in $ million with two decimals.
Milton Industries expects free cash flows of $ 4 million each year.​ Milton's corporate tax rate...
Milton Industries expects free cash flows of $ 4 million each year.​ Milton's corporate tax rate is 30 % and its unlevered cost of capital is 13 % Milton also has outstanding debt of $ 8.77 ​million, and it expects to maintain this level of debt permanently. a. What is the value of Milton Industries without​ leverage? to two decimal point b. What is the value of Milton Industries with​ leverage? to decimal point
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?
Milton Industries expects free cash flows of $14 million each year. Milton's corporate tax rate is...
Milton Industries expects free cash flows of $14 million each year. Milton's corporate tax rate is 30%, and its unlevered cost of capital is 10%. Milton also has outstanding debt of $60.57 million, and it expects to maintain this level of debt permanently. a. What is the value of Milton Industries without leverage? b. What is the value of Milton Industries with leverage?
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?
Digital Organics (DO) has the opportunity to invest $1.15 million now (t = 0) and expects...
Digital Organics (DO) has the opportunity to invest $1.15 million now (t = 0) and expects after-tax returns of $730,000 in t = 1 and $830,000 in t = 2. The project will last for two years only. The appropriate cost of capital is 11% with all-equity financing, the borrowing rate is 7%, and DO will borrow $270,000 against the project. This debt must be repaid in two equal installments of $135,000 each. Assume debt tax shields have a net...
Digital Organics (DO) has the opportunity to invest $1.15 million now (t = 0) and expects...
Digital Organics (DO) has the opportunity to invest $1.15 million now (t = 0) and expects after-tax returns of $730,000 in t = 1 and $830,000 in t = 2. The project will last for two years only. The appropriate cost of capital is 11% with all-equity financing, the borrowing rate is 7%, and DO will borrow $270,000 against the project. This debt must be repaid in two equal installments of $135,000 each. Assume debt tax shields have a net...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT