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What is value of the interest tax shield from the new debt

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Reference no: EM131816589

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: EM131816589

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