Calculate present value of firm tax saving due to new debt

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Value the present value of a firm’s tax saving due to new debt that they will add for an add on project that will last for three years. The project will add debt today of 75 million and they will reduce debt on a fixed schedule to 50 million in year one, 25 million in years two and 0 debt in year three. Calculate the present value of the firm’s tax saving due to new debt. The firm has an equity cost of capital of 9% and debt cost of capital of 4%. Tax rate is 40%

Reference no: EM131332260

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