Calculate the annual value of an interest tax shield under the assumption that a firm maintains debt at a permanent $1,000,000 level and rate of 12 percent. The corporate tax rate is 35 percent. If there is no chance of financial distress, how does the value of the firm change as a result of this debt?

Answer rating: 100% (QA)

Tax shield Debt value x Interest rate x Tax Tax shield 1000000 ... View the full answer