Markum Enterprises is considering permanently adding $127 million of debt to its capital structure. Markums corporate tax

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Markum Enterprises is considering permanently adding $127 million of debt to its capital structure. Markum’s corporate tax rate is 40%.

a. Absent personal taxes, what is the value of the interest tax shield from the new debt?

b. If investors pay a tax rate of 35% on interest income, and a tax rate of 25% on income from dividends and capital gains, what is the value of the interest tax shield from the new debt?

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Corporate Finance The Core

ISBN: 9781292158334

4th Global Edition

Authors: Jonathan Berk, Peter DeMarzo

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Question Posted: Feb 29, 2024 04:00 AM

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Markum Enterprises is considering permanently adding $127 million of debt to its capital structure. Markums corporate tax

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Corporate Finance The Core

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