Question: Ten years have passed since Arnell issued 10 million in

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 cost of debt capital is 4%.
a. What is Arnell’s annual interest tax shield?
b. What is the present value of the interest tax shield today?


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  • CreatedAugust 06, 2014
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