Calculate present value of firm tax saving due to new debt

Assignment Help Financial Management

Reference no: EM132018850

Value the present value of a firm’s tax saving due to new debt that they will add for an add on project that will last for three years. The project will add debt today of 75 million and they will reduce debt on a fixed schedule to 50 million in year one, 25 million in years two and 0 debt in year three. Calculate the present value of the firm’s tax saving due to new debt. The firm has an equity cost of capital of 9% and debt cost of capital of 3%. Tax rate is 40%

Reference no: EM132018850

Questions Cloud

What was total real return on investment : If the inflation rate was 3.2 percent over the past year, what was your total real return on investment?

What are arithmetic and geometric returns for the stock : What are the arithmetic and geometric returns for the stock?

Solve for the firm present value of the tax shield : Solve for the firm’s present value of the tax shield

Add leverage and maintain interest coverage ratio : What will be Boogle’s value if you add leverage and maintain an interest coverage ratio of 10%?

Calculate present value of firm tax saving due to new debt : Calculate the present value of the firm’s tax saving due to new debt.

Determine the standard deviation of the expected return : Determine the standard deviation of the expected return.

Identify the firms market value capital structure : Calculate the firm's market value capital structure. Do not round intermediate calculations. Round your answers to two decimal places.

How much will you have after the years : Suppose you save $12000 per year in an ordinary annuity promising you an interest rate of i = 3.5% compounded once per year.

Which one of them would you choose : You can invest in the risk-free security and only one of the risky portfolios. Which one of them would you choose? What if the risk-free rate is 10%?

User Account

All Pages