Arnell Industries has $80 million in permanent debt outstanding. The firm will pay interest only on this

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Arnell Industries has $80 million in permanent debt outstanding. The firm will pay interest only on this debt. Arnell's marginal tax rate is expected to be 25% for the foreseeable future.

a. Suppose Arnell pays interest of 10% per year on its debt. What is its annual interest tax shield?

b. What is the present value of the interest tax shield, assuming its risk is the same as the loan?

c. Suppose instead the interest rate on the debt were

What is the present value of the interest tax shield in this case?

Related Book For answer-question

Fundamentals Of Corporate Finance

ISBN: 9780135811603

5th Edition

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford

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Posted Date: May 02, 2024 08:33 AM

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Arnell Industries has $80 million in permanent debt outstanding. The firm will pay interest only on this

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Fundamentals Of Corporate Finance

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