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What is the present value of the tax shields

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Avco is investing $100 million in a new project. To finance this investment the company will issue $100 million of new debt in the form of a 4-year bond. The bond will be repaid in one bullet payment after 4 years. The cost of debt associated with this bond is 4% and the marginal corporate tax rate of Avco is 20%. Using the APV method, what is the present value of the tax shields associated with this project?

Reference no: EM133057468

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