Pelamed Pharmaceuticals has EBIT of $325 million in 2006. In addition, Pelamed has interest expenses of $125 million and a corporate tax rate of 40%.
a. What is Pelamed’s 2006 net income?
b. What is the total of Pelamed’s 2006 net income and interest payments?
c. If Pelamed had no interest expenses, what would its 2006 net income be? How does it compare to your answer in part b?
d. What is the amount of Pelamed’s interest tax shield in 2006?