Value of tax shield
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Q: (EBIT).
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Q: Shaye, Inc. has $260 million of debt outstanding at an interest rate of 12 percent. What is the…
A:
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Q: The tax rate applicable to Blue Co. is 20%. The firm pays 5% interest on the P350,000 outstanding…
A: Outstanding loan = P 350000 Interest rate = 5% Tax rate = 20% Preferred dividends = P 16500
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A: After tax cost of debt is the cost which the bondholder expects after adjusting for taxes.
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A: Loan amount = P20,000,000 Interest rate = 10% Tax rate = 30%
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Q: Corporation's after−tax cost of debt is
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Q: The tax rate applicable to Ivan Co. is 20%. The firm pays 5% interest on the P350,000 outstanding…
A: Interest paid = Face value of Loan * Interest rate =350000 * 5% = 17500
Q: vanhoe Corporation has $310 million of debt outstanding at an interest rate of 9 percent. What is…
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Q: Rogot Instruments makes fine violins and cellos. It has $1.9 million in debt outstanding, equity…
A: WACC- Weighted average cost of capital (WACC) is the rate that a company is expected to pay on…
Q: The tax rate applicable to Blue Co. is 20%. The firm pays 5% interest on the P350,000 outstanding…
A:
Q: Your firm currently has $80 million in debt outstanding with a 8% interest rate. The terms of the…
A: Hi student Since there are multiple questions, we will answer only first question In case of debt…
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A: Answer: 1. Calculation of the Rogot's pretax WACC: Formula, Pre-tax WACC = (Cost of equity * Weight…
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Q: yhorse Corp. has $370 million of debt outstanding at an interest rate of 14 percent. What is the…
A: The debt has interest rate but that interest has advantage of tax and due to this debt has value.
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A: After-Tax Cost for Mortage bonds = Interest rate x (1 - tax rate) = 5% x (1-0.40) = 3% After-Tax…
Q: juanita's steak house has 12,000 of debt outstanding that is selling at par and has a coupon rate of…
A: Computation of PV of the tax shield:Hence, the present value of the tax shield is $4,080.
Q: Cha Cha Corporation has three long term loans (interest bearing debt): a loan of $100,000 at 6%…
A: Given, interest bearing debt: 6% loan of $100,000 8% loan of $100,000 14% loan of $100,000 Equity of…
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LEX Corporation has $350 million of debt outstanding at an interest rate of 8 percent. What is the dollar value of the tax shield on that debt, just for this year, if LEX is subject to a 35 percent marginal tax rate? (Enter amount in dollars.)
Value of tax shield | $enter the dollar value of the tax shield |
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- Rhodes Corporations financial statements are shown after part f. Suppose the federal-plus-state tax corporate tax is 25%. Answer the following questions. a. What is the net operating profit after taxes (NOPAT) for 2020? b. What are the amounts of net operating working capital for both years? c. What are the amounts of total net operating capital for both years? d. What is the free cash flow for 2020? e. What is the ROIC for 2020? f. How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars)The Berndt Corporation expects to have sales of 12 million. Costs other than depreciation are expected to be 75% of sales, and depreciation is expected to be 1.5 million. All sales revenues will be collected in cash, and costs other than depreciation must be paid for during the year. Berndts federal-plus-state tax rate is 40%. Berndt has no debt. a. Set up an income statement. What is Berndts expected net income? Its expected net cash flow? b. Suppose Congress changed the tax laws so that Berndts depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow? c. Now suppose that Congress changed the tax laws such that, instead of doubling Berndts depreciation, it was reduced by 50%. How would profit and net cash flow be affected? d. If this were your company, would you prefer Congress to cause your depreciation expense to be doubled or halved? Why?Shaye, Inc. has $260 million of debt outstanding at an interest rate of 12 percent. What is the present value of the tax shield on that debt if it has no maturity and if Shaye is subject to a 32 percent marginal tax rate? Present value of tax shield $_________
- How much debt Is outstanding if the present value of a perpetual tax shield is $350,000, the tax rate is 21% and the interest rate on the debt is 10%? O $300,000 O$1428,571 O$3.000,000 O$1.666.667PMF, Inc., can deduct interest expenses next year up to 30% of EBIT. This limit is equally likely to be $20 million, $28 million, or $36 million. Its corporate tax rate is 38%, and investors pay a 30% tax rate on income from equity and a 35% tax rate on interest income. a. What is the effective tax advantage of debt if PMF has interest expenses of $16 million this coming year? b. What is the effective tax advantage of debt for interest expenses in excess of $36 million? (Ignore carryforwards). c. What is the expected effective tax advantage of debt for interest expenses between $20 million and $28 million? (Ignore carryforwards). d. What level of interest expense provides PMF with the greatest tax benefit?PMF, Inc., can deduct interest expenses next year up to 30% of EBIT. This limit is equally likely to be $20 million, $28 million, or $36 million. Its corporate tax rate is 38%, and investors pay a 30% tax rate on income from equity and a 35% tax rate on interest income. a. What is the effective tax advantage of debt if PMF has interest expenses of $16 million this coming year? b. What is the effective tax advantage of debt for interest expenses in excess of $36 million? (Ignore carryforwards). c. What is the expected effective tax advantage of debt for interest expenses between $20 million and $28 million? (Ignore carryforwards). d. What level of interest expense provides PMF with the greatest tax benefit? a. What is the effective tax advantage of debt if PMF has interest expenses of $16 million this coming year? %. (Round to one If PMF has interest expenses of $16 million this coming year, the effective tax advantage is decimal place.)
- DBF borrows $3.29B by issuing 12-year bonds. ECB's cost of debt is 6.07%, so it will need to pay interest each year for the next 12 years, and then repay the principal $3.29B in year 12. ECB's marginal tax rate will remain 42.99% throughout this period. By how much does the interest tax shield increase the value of DBF? NOTE: Provide your answers in Millions. E.G. for 100M you must enter 100.0000, for 20M you must enter 20.000, etc.One of the advantages of borrowing is that interest is deductible for income tax purposes.a. If a company pays 8 percent interest to borrow $500,000, but is in an income tax bracket thatrequires it to pay 40 percent income tax, what is the actual net-of-tax interest cost that thecompany incurs?b. What is the effective interest rate that is paid by the company?Ivanhoe Corporation has $310 million of debt outstanding at an interest rate of 9 percent. What is the dollar value of the tax shield on that debt, just for this year, if Ivanhoe is subject to a 35 percent marginal tax rate?
- 1. To calculate the after-tax cost of debt, multiply the before-tax cost of debt by ______. 2. Western Gas & Electric Company (WGC) can borrow funds at an interest rate of 12.50% for a period of six years. Its marginal federal-plus-state tax rate is 25%. WGC’s after-tax cost of debt is ________. (rounded to two decimal places). 3. At the present time, Western Gas & Electric Company (WGC) has 15-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,555.38 per bond, carry a coupon rate of 11%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 25%. If WGC wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? (Note: Round your YTM rate to two decimal place.) 4.73% 4.11% 4.93% 3.29%PMF, Inc., can deduct interest expenses next year up to 30% of EBIT. This limit is equally likely to be $15 million, $21 million, or $27 million. Its corporate tax rate is 35%, and investors pay a 20% tax rate on income from equity and a 35% tax rate on interest income. What is the effective tax advantage of debt if PMF has interest expenses of $12 million this coming year? (Round to two decimalplaces.) What is the effective tax advantage of debt for interest expenses in excess of $27 million? (Ignore carryforwards) (Round to two decimalplaces.) What is the expected effective tax advantage of debt for interest expenses between $15 million and $21 million? (Ignore carryforwards) (Round to two decimalplaces.) What level of interest expense provides PMF with the greatest tax benefit? (Round to two decimalplaces.)Hello. I need help with the following question please. To calculate the after-tax cost of debt, multiply the before-tax cost of debt by(1 – T) . Omni Consumer Products Company (OCP) can borrow funds at an interest rate of 9.70% for a period of four years. Its marginal federal-plus-state tax rate is 45%. OCP’s after-tax cost of debt is 5.34% (rounded to two decimal places). At the present time, Omni Consumer Products Company (OCP) has 5-year noncallable bonds with a face value of $1,000 that are outstanding. These bonds have a current market price of $1,050.76 per bond, carry a coupon rate of 10%, and distribute annual coupon payments. The company incurs a federal-plus-state tax rate of 45%. If OCP wants to issue new debt, what would be a reasonable estimate for its after-tax cost of debt (rounded to two decimal places)? 3.83% 5.75% 4.79% 4.31%