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    Value of the Interest Tax Shield

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    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

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    https://brainmass.com/business/accounting/value-of-the-interest-tax-shield-588982

    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