A levered company faces a corporate tax rate of $40\%.$ If the company has perpetual debt with a face value of $24$ million euro and a market value equal to $21$ million euro, what is the value the company$$s tax shield?

Answer rating: 100% (QA)

The value of the companys tax shield due to debt can be calculated using the formula for the present value of tax shield which is the tax rate multiplied by the debt Tax Shield Tax RateDebt Given Corporate tax rate 40 Face value of debt 24 million Market value of debt 21 million First we need to calculate ... View the full answer