Capital Budgeting
XYZ enterprise currently issues bond of $5 million with 10% interest rate. XYZ plans to issue $1 million more bonds at the end of each year for the next 5 years. If XYZ’s marginal corporate tax rate is 40%, what is the interest tax shield form XYZ’s bond in each of the 5 years?
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Year |
0 |
1 |
2 |
3 |
4 |
5 |
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Debt |
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Interest |
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Tax shield |
