Annual interest tax shield and debt issuance

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In recent years, Haverhill Corporation has averaged a net income of $10 million per year on net sales of $100 million per year. It currently has no long-term debt, but is considering a debt issue of $5million. The interest rate on the debt would be 6 percent. Haverhill currently faces an effective tax rate of 35 percent. What would beHaverhill’s annual interest tax shield if it goes through with the debt issuance?

Reference no: EM131055832

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