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What would have been the current value of croydon corp

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Reference no: EM132796783

At the end of 2014, Croydon Corp. paid $855 million in interest on the debt:

Problem a. How much more would this corporation have paid in taxes if it had financed itself solely with equity?

Problem b. What would have been the current value of Croydon Corp.'s interest tax savings if the company intended to permanently maintain its debt at the 2014 level? Assume an interest rate of 6.5% and a tax rate of 40%.

Reference no: EM132796783

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