On January 1st 2015, DL Corp. signed a 5-year $30 million loan contract with Bank of Fisher with annual interest rate of 8%. The loan will be automatically rolled over unless either party opts out. The corporate tax rate is 35% till the end of 2017. Starting from January 1st 2018, the corporate tax rate is lowered to 21%. Assuming the lending relationship is stable, what is the present value on January 1st 2015 of the tax shield effect from the loan contract?

Answer rating: 100% (QA)

Heres how to calculate the present value of the tax shield effect from the loan contract on January ... View the full answer