Tax savings from financing the project with a mortgage

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Reference no: EM131337186

Your firm is in a 40% combined federal and state marginal income tax bracket. Your annual income is $500, 000 per year for two years. If you finance some project with a $1.3 million mortgage at an interest rate of 8%, how much will Uncle Sam receive? If your finance the project with cash, how much will Uncle Same receive? If other equivalent firms are offering investors expected rates of return of 10%, what is the PV of the tax savings from financing the project with a mortgage?

Reference no: EM131337186

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