A company has £350 million of long-term debt in issue paying interest at a rate of 4%, and plans to maintain this level of debt going forward. The marginal tax rate faced by the firm is 25%. Assuming that the company is sufficiently profitable, the present value of the tax shield on interest expense is: a. £84.135m b. £3.365m c. £3.5m d. £87.5m
A company has £350 million of long-term debt in issue paying interest at a rate of 4%, and plans to maintain this level of debt going forward. The marginal tax rate faced by the firm is 25%. Assuming that the company is sufficiently profitable, the present value of the tax shield on interest expense is: a. £84.135m b. £3.365m c. £3.5m d. £87.5m
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A company has £350 million of long-term debt in issue paying interest at a rate of 4%, and plans to maintain this level of debt going forward. The marginal tax rate faced by the firm is 25%. Assuming that the company is sufficiently profitable, the
a. £84.135m b. £3.365m c. £3.5m
d. £87.5m
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