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Dollar value of tom interest tax shield

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Tom has $100 of outstanding debt, on which it pays an interest rate = 15%/year. Its corporate income tax rate = 20%. Its full income statement is as follows:

Revenues $400
COGS $300
Expenses $ 80
EBIT $ 20
Interest $ 15
EBT $ 5
Tax @ 20% $ 1
Net Income $ 4

What is the dollar value of Tom's interest tax shield?

Reference no: EM133113688

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