Your firm currently has $112 million in debt outstanding with a 10% interest rate. The terms of the loan require it to repay $28 million of the balance each year. Suppose the marginal corporate tax rate is 25%, and that the interest tax shields have the same risk as the loan. What is the present value of the interest tax shields from this debt? The present value of the interest tax shields is Smillion, (Round to two decimal places)

Your firm currently has $112 million in debt outstanding with a 10% interest rate. The terms of the loan require it to repay $28 million of the balance each year. Suppose the marginal corporate tax rate is 25%, and that the interest tax shields have the same risk as the loan. What is the present value of the interest tax shields from this debt? The present value of the interest tax shields is Smillion, (Round to two decimal places)

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

See similar textbooks

Similar questions

A firm is proceeding with a bond issue to raise (borrow) $100 million. The interest rate is the cost of debt of 8%, and interest will be paid annually for the nine (9) year term of the debt. If the company's tax rate is 30%, what is the present value of the total interest tax shields of this nine-year debt? A. $30.0 million B. $15.0 million C. $20.5 million D. $8.0 million
K Avicorp has a $11.5 million debt issue outstanding, with a 5.8% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 93.67% of par value a. What is Avicorp's pretax cost of debt? b. If Avicorp faces a 28% tax rate, what is its after-tax cost of debt? Note Assume that the firm will always be able to utilize its full interest tax shield. BECER a. The cost of debt is % per year. (Round to two decimal places)
You bought a 90-day bank bill 30 days ago. The face value of the bill is $100,000. The yield on this bill was 5% per annum. Today, when you sell the bank bill, the yield has increased to 6%. What is your return holding the bank bill?
Avicorp has a $10.8 million debt issue outstanding, with a 6.1% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 93.65% of par value. a. What is Avicorp's pretax cost of debt? b. If Avicorp faces a 35% tax rate, what is its after-tax cost of debt? Note: Assume that the firm will always be able to utilize its full interest tax shield. a. The cost of debt is % per year. (Round to two decimal places.)
Avicorp has a $14.4 million debt issue outstanding, with a 5.9% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 96% of par value. a. What is Avicorp's pre-tax cost of debt? Note: Compute the effective annual return. b. If Avicorp faces a 40% tax rate, what is its after-tax cost of debt? Note: Assume that the firm will always be able to utilize its full interest tax shield. a. The cost of debt is % per year. (Round to four decimal places.) b. If Avicorp faces a 40% tax rate, the after-tax cost of debt is %. (Round to four decimal places.)
Avicorp has a $12.3 million debt issue outstanding, with a 6.1% coupon rate. The debt has semi-annual coupons, the next coupon is due in six months, and the debt matures in five years. It is currently priced at 96% of par value. a. What is Avicorp's pre-tax cost of debt? Note: Compute the effective annual return. b. If Avicorp faces a 40% tax rate, what is its after-tax cost of debt? Note: Assume that the firm will always be able to utilize its full interest tax shield.
An investment of $110,000 in safe 10-year corporate bonds yields an average of 12% per year, payable each year. The effective income tax rate is 30%, and infation will average 4% per year. How much wil tir of $110,000 be worth in 10 years in today's purchasing power after income taxes and inflation are taken into account? The FW is S (Round to the nearest dollar.)
14
Bhupatbhai
Please solve correctly
Braxton Enterprises currently has debt outstanding of $45 million and an interest rate of 10%. Braxton plans to reduce its debt by repaying $9 million in principal at the end of each year for the next five years.If Braxton's marginal corporate tax rate is 21%, what is the interest tax shield from Braxton's debt in each of the next five years? (Round to three decimal places.)
Sandyhorse Corp. has $370 million of debt outstanding at an interest rate of 14 percent. What is the present value of the interest tax shield if the debt has no maturity and if Sandyhorse is subject to a 30 percent marginal tax rate? $_________

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS