Debt tax shield after restructuring

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Reference no: EM131021971

Bavarian Brew, an unlevered firm, has an expected EBIT of $500,000. The required return on assets for the firm’s assets is 10%. The company has 250,000 shares outstanding. The company is considering raising $1 million in debt with a required return of 6% and would use the proceeds to repurchase outstanding stock. What is the present value of Bavarian brew's debt tax shield after restructuring? Assume corporate taxes of 34%

Reference no: EM131021971

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