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Hanson Ltd had a market value of $400m and had no debt The company has decided to issue $100m worth of non-maturing debt at an interest rate of 6%. The corporate tax rate is 30%. (Write the answer in full. Don't round to millions and don't include any symbols. For example, if your answer is $50m, type 50000000) a) Calculate the present value of the tax shield Answer: $ b) Calculate the value of the firm with leverage Answer $

Hanson Ltd had a market value of $400m and had no debt The company has decided to issue $100m worth of non-maturing debt at an interest rate of 6%. The corporate tax rate is 30%. (Write the answer in full. Don't round to millions and don't include any symbols. For example, if your answer is $50m, type 50000000) a) Calculate the present value of the tax shield Answer: $ b) Calculate the value of the firm with leverage Answer $

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Hanson Ltd had a market value of $400m and had no debt The company has decided to issue $100m worth of non-maturing debt at an interest rate of 6%. The corporate tax rate is 30%. (Write the answer in full. Don't round to millions and don't include any symbols. For example, if your answer is $50m, type 50000000 ) a) Calculate the present value of the tax shield Answer: $ b) Calculate the value of the firm with leverage Answer $
Transcribed Image Text:Hanson Ltd had a market value of $400m and had no debt The company has decided to issue $100m worth of non-maturing debt at an interest rate of 6%. The corporate tax rate is 30%. (Write the answer in full. Don't round to millions and don't include any symbols. For example, if your answer is $50m, type 50000000 ) a) Calculate the present value of the tax shield Answer: $ b) Calculate the value of the firm with leverage Answer $
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