What is the present value of the interest tax? shield

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Arnell Industries has just issued $25 million in debt? (at par). The firm will pay interest only on this debt.? Arnell's marginal tax rate is expected to be 21% for the foreseeable future.

a. Suppose Arnell pays interest of 8% per year on its debt. What is its annual interest tax? shield?
If Arnell pays interest of 8% per year on its? debt, the annual interest tax shield is ?$............... million. ? (Round to three decimal? places.)

b. What is the present value of the interest tax? shield, assuming its risk is the same as the? loan?

The present value of the interest tax shield is ?$............... million.  ?(Round to one decimal? place.)

c. Suppose instead that the interest rate on the debt is 11%. What is the present value of the interest tax shield in this? case?

If instead the fair interest rate on the debt is 11%?, the present value of the interest tax shield is ?$............ million. ? (Round to one decimal? place.)

Reference no: EM132551212

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