Asked Nov 7, 2019

juanita's steak house has 12,000 of debt outstanding that is selling at par and has a coupon rate of 8%. the tax rate is 34%. what is the present value of the tax shield?


Expert Answer

Step 1

Computation of PV of the tax shield:

Hence, the present value of the tax shield is $4,080.


Image Transcriptionclose

A B Amount 12,000 8% 1 Particulars Outstanding debt 3 Coupon rate 4 Rate of tax 5 Interest payment 34% 960 6 Tax shield 326.4 7 Present value 4080


Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in



Related Finance Q&A

Find answers to questions asked by student like you
Show more Q&A

Q: John invests a sum of money in a retirement account with a fixed annual interest rate of 2.63% compo...

A: It is given that,Annual interest rate is 2.63% compounded continuously.Number of years is 15.Accumul...


Q: I am currently working on some practice problems for finance and need help setting them up as well a...

A: Hi, As per Q&A guidelines, we should answer the first question when multiple questions posted in...


Q: Consider the following project for Hand Clapper, Inc. The company is considering a 4-year project to...

A: As per the rule, I will answer first three parts of the question. Please post again for the last par...


Q: With blank voting, all directors up for election are vorted on by the share holders at the same time...

A: With cumulative voting, all directors up for election are voted on by the share holders at the same ...


Q: A 2-year Treasury security currently earns 1.77 percent. Over the next two years, the real risk-free...

A: Calculate the maturity risk premium as follows:


Q: Sam Long anticipates he will need approximately $225,000 in 15 years to cover his daughter's college...

A: Click to see the answer


Q: Please show all equations and work as needed. Make the correct answer clear. If possible, please typ...

A: The computation of net amount is as follows:Hence, the net amount of funds from the loan is $511560....


Q: find the interst periodic deposit 4000 rate .055 time 40 years

A: Assumption:It is assumed that the periodic deposit of $4,000 is compounded annually at the rate of 5...


Q: 01 O63 9a How much money should be deposited today in an account that earns 5% compounded semiannual...

A: We need to use the concept of time value of money to solve the question. According to the concept of...