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The value of the interest tax shield

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Markum Enterprises is considering permanently adding $100 million of debt to its capital structure. Markum's corporate tax rate is 35%.

a. Absent personal taxes, what is the value of the interest tax shield from the new debt?

b. If investors pay a tax rate of 40% on interest income and a tax rate of 20% on income from dividends and capital gains, what is the value of the interest tax shield from the new debt?

Reference no: EM131125444

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