Explore BrainMass

# Value of the Interest Tax Shield

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

If a firm permanently borrows \$100 million at an interest rate of 8%, what is the present value of the interest tax shield? (Assume that the marginal corporate tax rate is 30%.)

\$8.00 million

\$5.60 million

\$30.00 million

\$26.67 million

If a firm permanently borrows \$50 million at an interest rate of 10%, what is the present value of the interest tax shield? Assume a 30% marginal corporate tax rate.

\$50.0 million

\$25.0 million

\$15.0 million

\$1.5 million
German laws and accounting procedures are designed, generally, to protect interests of:

shareholders.

managers.

creditors.

employees

#### Solution Preview

Question 4
Present value of interest tax shield = \$100 million*8%*30%/8% = \$30 million

Present value of interest tax ...

#### Solution Summary

This Solution contains calculations to aid you in understanding the Solution to the provided questions.

\$2.19