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Compute the present value of interest tax shields generated

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Reference no: EM132763230

Problem 1: Considering a corporate tax rate of 20%, compute the present value of interest tax shields generated by the following types of debt:

a) €100,000 10-year loan with maturity in 10 yearsandinterest rate of 6%. Debt is to be paid 20% in 2 years, 30% in 7 years and the remaining at maturity.

b) Perpetual bond (zero-coupon)with an implied yield of 5%.

c) 5-year loan with maturity in 5 years, interestrate of 5% and constant annual payments

Reference no: EM132763230

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