The interest tax shield increase the value of ECB

Assignment Help Financial Management

Reference no: EM132029540

ECB borrows $1750000 USDs by issuing 4-year bonds. ECB's cost of debt is 5.5%, so it will need to pay $96250 USDs in interest each year for the next 4 years, and then repay the principal $1750000 USD in year 4. ECB's marginal tax rate will remain 35 throughout this period. By how much (in USDs) does the interest tax shield increase the value of ECB? Note: Express your answers in strictly numerical terms. For example, if the answer is $500, enter 500 as an answer.

Reference no: EM132029540

Questions Cloud

Hospital expanded the number of patient beds : On July 1, Community Hospital expanded the number of patient beds from 156 to 200. Use the following information to determine the occupancy rate

Determine the probability of exactly or all of an event : What calculation would you use to determine the probability of exactly or all of an event happening?

What proportion of the scores in a normal distribution : 1. What proportion of the scores in a normal distribution are higher than a T-score of 70?

Pertaining to the total number of springfield tourists : Peter Pan has accumulated statistics for the past ten years pertaining to the total number of Springfield tourists, as well as the number of customers

The interest tax shield increase the value of ECB : By how much (in USDs) does the interest tax shield increase the value of ECB?

Examine the sourcing methods and supplier base : Critically examine the sourcing methods and supplier base - propose a strategic source framework which can lead to procurement excellence and value growth

What is the total annual cost of holding and ordering : What is the total annual cost of holding and ordering these satellite dishes?"

How you would address the problem with the staff member : You have just been hired as the new director of Tinkerbell's KinderCare. You are familiar with food safety principles, but soon realize that your staff is not.

What should the value of the equity be : You expect to generate a cash flow of $2200000 at the end of the year. The cost of debt is 8%. What should the value of the equity be?

User Account

All Pages