PLEASE ANSWER CORRECTLY AND FAST
Homework Answers
A) Tax savings will be same for 2020 and 2029 ignoring time value
| With the bond | Without the bond | |
| EBIT | $415,000.00 | $415,000.00 |
| Interest | $33,200.00 | $0.00 |
| Pre-tax Income | $381,800.35 | $415,000.00 |
| Taxes at 35% | $133,630.12 | $145,250.00 |
| Net Income | $248,170.23 | $269,750.00 |
| Tax saving | $11,619.88 |
B) For 2020
| With the bond | PV | Without the bond | PV | |
| EBIT | $415,000.00 | $384,259.26 | $415,000.00 | $384,259.26 |
| Interest | $33,200.00 | $30,740.74 | $0.00 | $0.00 |
| Pre-tax Income | $381,800.35 | $353,518.87 | $415,000.00 | $384,259.26 |
| Taxes at 35% | $133,630.12 | $123,731.60 | $145,250.00 | $134,490.74 |
| Net Income | $248,170.23 | $229,787.26 | $269,750.00 | $249,768.52 |
| Tax saving | $10,759.14 |
For 2029
| With the bond | PV | Without the bond | PV | |
| EBIT | $415,000.00 | $207,603.32 | $415,000.00 | $207,603.32 |
| Interest | $33,200.00 | $16,608.27 | $0.00 | $0.00 |
| Pre-tax Income | $381,800.35 | $190,995.41 | $415,000.00 | $207,603.32 |
| Taxes at 35% | $133,630.12 | $66,848.39 | $145,250.00 | $72,661.16 |
| Net Income | $248,170.23 | $124,147.01 | $269,750.00 | $134,942.16 |
| Tax saving | $5,812.77 |
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PLEASE ANSWER CORRECTLY AND FAST
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