This post calculates the PV of interest tax shields.
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Your firm currently has $100 million in debt outstanding with a10% interest rate. The terms of the loan require the firm to repay $25 million of the balance each year. Suppose that the marginal corporate tax rate is 40%, 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?
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The solution provides the calculations and solution to determine the present value of the interest tax shields from debt.
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