What is the interest tax shield? ( Do not round intermediate calculations. Enter
ID: 2622735 • Letter: W
Question
What is the interest tax shield? (Do not round intermediate calculations. Enter your answer in dollars, not millions of dollars (e.g., 1,234,567).)
B)
Dupuis can borrow at 9 percent. Dupuis currently has no debt, and the cost of equity is 15 percent. The current value of the firm is $735,000. The corporate tax rate is 35 percent.
What will the value be if Dupuis borrows $220,000 and uses the proceeds to repurchase shares?
C)
Neal Enterprises has no debt. Its current total value is $45 million. Assume the company sells $16 million in debt.
Assume the company
A)Fleury Co. has a 38 percent tax rate. Its total interest payment for the year just ended was $24 million.
Explanation / Answer
C) Debt-equity ratio = 16/29 = 0.55
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