Braxton Enterprises currently has debt outstanding of $30 million and an interest rate of 8%. Braxton...
Braxton Enterprises currently has debt outstanding of $30 million and an interest rate of 8%. Braxton plans to reduce its debt by repaying $6 million in principal at the end of each year for the next five years. If Braxton's marginal corporate tax rate is 30%, what is the interest tax shield from Braxton's debt in each of the next five years?
Homework Answers
| Beginning balance | Interest @ 8% | Principal Paid | Ending balance | Tax shield @30% |
| 30000000.00 | 2400000.00 | 6000000.00 | 24000000.00 | 720000.00 |
| 24000000.00 | 1920000.00 | 6000000.00 | 18000000.00 | 576000.00 |
| 18000000.00 | 1440000.00 | 6000000.00 | 12000000.00 | 432000.00 |
| 12000000.00 | 960000.00 | 6000000.00 | 6000000.00 | 288000.00 |
| 6000000.00 | 480000.00 | 6000000.00 | 0.00 | 144000.00 |
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Braxton Enterprises currently has debt outstanding of $30
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Braxton Enterprises currently has debt outstanding of $50 million and an interest rate of 7%. Braxton plans to reduce its debt by repaying $10 million in principal at the end of each year for the next five years. If Braxton's marginal corporate tax rate is 30%, what is the interest tax shield from Braxton's debt in each of the next five years?
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