EBK CORPORATE FINANCE
EBK CORPORATE FINANCE
4th Edition
ISBN: 9780134202785
Author: DeMarzo
Publisher: VST
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Chapter 15, Problem 9P

Safeco Inc. has no debt, and maintains a policy of holding $10 million in excess cash reserves, invested in risk-free Treasury securities. If Safeco pays a corporate tax rate of 35%, what is the cost of permanently maintaining this $10 million reserve? (Hint : What is the present value of the additional taxes that Safeco will pay?)

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EBK CORPORATE FINANCE

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