Under the assumption that KMS's market share will increase by 0.22% per year, you determine that the plant will require an expansion in 2015. KMS's current outstanding debt, the interest on the debt, and the interest tax shield are given in the table below. The expansion will cost $21.8 million. Assuming that the financing of the expansion will be delayed accordingly (end of 2015) calculate the projected interest payments and the amount of the projected interest tax shields (assuming that KMS still uses a 10-year bond, interest rates remain the same at 7.1%, and KMS's tax rate is 35%) through 2018. Current values (5000) Outstanding debt before expansion Interest on debt before expansion Interest Tax Shield before expansion 2013 $4,447 $316 $111 2014 $4,447 $316 $111 2015 $4,447 $316 $111 2016 $4,447 $316 $111 The total projected interest payments beginning in 2015 will be $(Round to the nearest dollar) 2017 $4,447 $316 $111 2018 $4,447 $316 $111

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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Under the assumption that KMS's market share will increase by 0.22% per year, you determine that the plant will require an expansion in 2015, KMS's current outstanding debt, the interest on
the debt, and the interest tax shield are given in the table below. The expansion will cost $21.8 million. Assuming that the financing of the expansion will be delayed accordingly (end of 2015)
calculate the projected interest payments and the amount of the projected interest tax shields (assuming that KMS still uses a 10-year bond, interest rates remain the same at 7.1%, and KMS's tax
rate is 35%) through 2018.
Current values (5000)
Outstanding debt before expansion
Interest on debt before expansion
Interest Tax Shield before expansion
2013
$4,447
$316
$111
2014
$4,447
$316
$111
2015
$4,447
$316
$111
2016
$4,447
$316
$111
The total projected interest payments beginning in 2015 will be $ (Round to the nearest dollar)
2017
$4,447
$316
$111
2018
$4,447
$316
$111
Transcribed Image Text:Under the assumption that KMS's market share will increase by 0.22% per year, you determine that the plant will require an expansion in 2015, KMS's current outstanding debt, the interest on the debt, and the interest tax shield are given in the table below. The expansion will cost $21.8 million. Assuming that the financing of the expansion will be delayed accordingly (end of 2015) calculate the projected interest payments and the amount of the projected interest tax shields (assuming that KMS still uses a 10-year bond, interest rates remain the same at 7.1%, and KMS's tax rate is 35%) through 2018. Current values (5000) Outstanding debt before expansion Interest on debt before expansion Interest Tax Shield before expansion 2013 $4,447 $316 $111 2014 $4,447 $316 $111 2015 $4,447 $316 $111 2016 $4,447 $316 $111 The total projected interest payments beginning in 2015 will be $ (Round to the nearest dollar) 2017 $4,447 $316 $111 2018 $4,447 $316 $111
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