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    Debt tax shield

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    A company issues a one-year bond with a face value of $25 million. The bond has a coupon rate of 8%. What are the minimum (accounting) earnings that the company has to have in order to fully capture the debt tax shield.

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    Solution Preview

    The earning before interest and tax should be equal to the interest amount so that the earnings ...

    Solution Summary

    The solution explains how to determine the minimum earnings so as to fully capture the debt tax shield