Ten years have passed since Arnell issued $10 million in perpetual interest only debt with a 6%

Question:

Ten years have passed since Arnell issued $10 million in perpetual interest only debt with a 6% annual coupon, as in Problem 6. Tax rates have remained the same at 35% but interest rates have dropped, so Arnell’s current capital is 4%.
a. What is Arnell’s annual interest tax shield?
b. What is the present value of the interest tax shield today?

Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking...