Table1: Information of the firms Unlevered firm Levered firm EBIT :10000 :10000 Interest :0 :3200 Taxable income : ? : ? Tax (tax rate: 34%) : ? : ? Net income : ? : ? CFFA : ? : ? Assuming that cost of debt =8%; unlevered cost of capital =10%; systematic risk of the asset is 1.5a)Fill in the blanksb) What is the present value of the tax shield?c) What is the size of debt?

Table1: Information of the firms Unlevered firm Levered firm EBIT :10000 :10000 Interest :0 :3200 Taxable income : ? : ? Tax (tax rate: 34%) : ? : ? Net income : ? : ? CFFA : ? : ? Assuming that cost...

Table1: Information of the firms

Assuming that cost of debt =8%; unlevered cost of capital =10%; systematic risk of the asset is 1.5

a)Fill in the blanks

b) What is the present value of the tax shield?

c) What is the size of debt?

Jun 03, 2022