What is the tax shield if debt is repaid after five years

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Reference no: EM132002083

A company borrows $800 million at an interest rate of 7.6% per annum. It pays taxes at an effective rate of 35%.

(a) What is the tax shield if the debt is permanent at $800 million?

(b) What is the tax shield if the debt is repaid after 5 years?

Reference no: EM132002083

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