Investment bankers for Firm A suggest that they issue more debt to increase the value of the company. Specifically, the investment banker recommends issuing 10,000 bonds each with 7.1% annual coupon, $1000 face value, and 8 years to maturity. The bankers believe the market will price the bonds at a YTM of 7.1%. If Firm A's tax rate is 20%, what is the expected yearly interest tax shield from this additional debt?

Answer rating: 100% (QA)

The expected yearly interest tax shield is equal to the interest exp... View the full answer