Capital Budgeting

XYZ enterprise currently issues bond of $5 million with 10% interest rate. XYZ plans to issue $1 million more bonds at the end of each year for the next 5 years. If XYZ’s marginal corporate tax rate is 40%, what is the interest tax shield form XYZ’s bond in each of the 5 years?

Year	0	1	2	3	4	5
Debt
Interest
Tax shield

Answer rating: 100% (QA)

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