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What is the present value of the tax shields

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Avco is investing $150 million in new project. To finance this investment the company will issue $150 million new debt in a form of 5-year bond. The bond will be repaid in the one bullet payment after 5 years. The cost of debt associated with this bond is 5% and marginal corporate tax rate of Avco is 35%. Using the APV method, what is the present value of the tax shields associated with this project?

Reference no: EM132703661

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