Assume that five years have passed since Wyatt issued this debt.While tax rates have remained at 40%,interest rates have dropped so that Wyatt's current cost of debt capital is now only 4%.The present value of Wyatt's annual interest tax shield is now closest to:

Question

Quizplus · Accepted Answer

D)Annual interest tax shield = Debt × Interest × Tax rate = $100 million × 7% × 40% = $2.8 million
PV Tax shield = 11ea7cce_3ce0_2150_928c_69cf269ab6bb_TB1626_11 = 11ea7cce_3ce0_2151_928c_933b52dedebd_TB1626_11 = $70 million

Assume That Five Years Have Passed Since Wyatt Issued This