Question: Use the following information to answer the sections below. Please answer all the sections in the space provided and do not forget to label the

Use the following information to answer the sections below. Please answer all the sections in the space provided and do not forget to label the sections.

X corporation is unlevered paying an annual tax amount of $1.5 billion. Xs marginal corporate tax rate is 30% and Xs borrowing cost is 5%.

Investors hold X stock in pension funds that are tax free at the personal level. If X corporation wants to decrease its taxes by $0.5 billion per year permanently, then calculate the amount that X corporation needs to borrow calculate the incremental value that would be created by this borrowing decision.

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