Your business currently has an outstanding debt of $80 million at an interest rate of 9%. The

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Question:

Your business currently has an outstanding debt of $80 million at an interest rate of 9%. The terms of the loan require the company to pay $20 million of the balance each year. Assume that the marginal corporate tax rate is 40% and that the interest tax savings have the same risk as the loan.

What is the present value of the interest tax savings on this debt?