Braxton Enterprises currently has debt outstanding of $50 million and an interest rate of 7%. Braxton plans to reduce its debt by repaying $10 million in principal at the end of each year for the next five years. Ifâ Braxton's marginal corporate tax rate is 30%â, what is the interest tax shield fromâ Braxton's debt in each of the next fiveâ years?
The interest tax shield in year one is $___million. â (Round to three decimalâ places.)
The interest tax shield in year two is ___million.âââ (Round to three decimalâ places.)
The interest tax shield in year three is ___ million.ââ â(Round to three decimalâ places.)
The interest tax shield in year four is $ ____million. â(Round to three decimalâ places.)
The interest tax shield in year five is ___ million. â (Round to three decimalâ places.)
Braxton Enterprises currently has debt outstanding of $50 million and an interest rate of 7%. Braxton plans to reduce its debt by repaying $10 million in principal at the end of each year for the next five years. Ifâ Braxton's marginal corporate tax rate is 30%â, what is the interest tax shield fromâ Braxton's debt in each of the next fiveâ years?
The interest tax shield in year one is $___million. â (Round to three decimalâ places.)
The interest tax shield in year two is ___million.âââ (Round to three decimalâ places.)
The interest tax shield in year three is ___ million.ââ â(Round to three decimalâ places.)
The interest tax shield in year four is $ ____million. â(Round to three decimalâ places.)
The interest tax shield in year five is ___ million. â (Round to three decimalâ places.)
Related questions
| Compute the present value of interest tax shields generated by these three debt issues. Consider corporate taxes only. The marginal tax rate is Tc = 0.40. |
| a. | A $2,400, one-year loan at 7%.(Do not round intermediate calculations. Round your answer to 2 decimal places.) PV (tax shield)____________$ |
| b. | A three-year loan of $2,400 at 7%. Assume no principal is repaid until maturity. (Do not round intermediate calculations. Round your answer to 2 decimal places.) PV (tax shield)____________$ |
| c. | A $2,400 perpetuity at 6%. PV (tax shield)____________$ |
