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Establishment Industries borrows $890 million at an interest rate of 8.5%. Establishment will pay tax at an effective rate of 21%. What is the present value of interest tax shields if:

Sagot :

Answer: See explanation

Explanation:

Your question isn't complete but I got a similar question online and here is the question that was asked.

What is the present value of interest tax shields if it expects to maintain this debt level into the far future?

The present value of the interest tax shield will be calculated as:

= Tax rate x Debt

= 890million x 21%

= $186.90 million

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