Consider a firm that has debt D and keeps it forever. The tax rate is Te. Debt is risk free and pays an interest rate r. Write down the value of the tax shield each year and the present value of this tax shield.

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
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Exercise 4.
Consider a firm that has debt D and keeps it forever. The tax rate is Te.
Debt is risk free and pays an interest rate r. Write down the value of the tax
shield each year and the present value of this tax shield.
Transcribed Image Text:Exercise 4. Consider a firm that has debt D and keeps it forever. The tax rate is Te. Debt is risk free and pays an interest rate r. Write down the value of the tax shield each year and the present value of this tax shield.
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