What is the present value of the tax shield? Assume that cost of debt = 8%; unlevered cost of capital = 10%; systematic risk of the asset is 1.5. Assume a 50% debt to equity ratio. А В C Unlevered...


What is the present value of the tax shield?


Assume that cost of debt = 8%; unlevered cost of capital = 10%; systematic risk of the asset is 1.5.  Assume a 50% debt to equity ratio.


А<br>В<br>C<br>Unlevered Firm Levered Firm<br>10,000<br>3,200<br>6,800<br>2,312<br>4,488<br>3,200<br>1<br>2 EBIT<br>10,000<br>3 Interest<br>4 Taxable Income<br>10,000<br>3,400<br>6,600<br>5 Tax (tax rate: 34%)<br>6 Net Income<br>7 CFFA<br>0<br>

Extracted text: А В C Unlevered Firm Levered Firm 10,000 3,200 6,800 2,312 4,488 3,200 1 2 EBIT 10,000 3 Interest 4 Taxable Income 10,000 3,400 6,600 5 Tax (tax rate: 34%) 6 Net Income 7 CFFA 0

Jun 05, 2022
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