Amount of Debt = Value of Unlevered Firm * % of Debt
= $301.6 billion * 0.127 = $38.3032 billion
PV of Tax Shield = Tax Rate * Amount of Debt
= 0.35 * $38.3032 billion = $13.40612 billion, or $13.41 billion
Assume that Microsoft has a total market value of $301.6 billion and a marginal tax rate...
Assume that Microsoft has a total market value of $ 299.5 billion and a marginal tax rate of 35 %. If it permanently changes its leverage from no debt by taking on new debt in the amount of 12.9 % of its current market value, what is the present value of the tax shield it will create?
Maggie Motors, Inc. (MMI) currently has a debt-to-equity ratio of 0.4 and a total market value of $300 million. MMI believes that increasing leverage (by taking on debt and repurchasing an equal dollar amount of shares) will increase firm value; consequently, TTI has set a target debt-to-equity ratio of 0.6, which they plan to maintain permanently. If MMI’s marginal tax rate is 25%, then present value of the tax shield it will create?
Suppose Microsoft has 8.75 billion shares outstanding and pays a marginal corporate tax rate of 21%. If Microsoft announces that it will payout $50 billion in cash to investors through a combination of a special dividend and a share repurchase, and if investors had previously assumed Microsoft would retain this excess cash permanently, by how much will Microsoft's share price change upon the announcement?
Summit Builders has a market debt-equity ratio of 0.85, a corporate tax rate of 35%, and pays 8% interest on its debt. By what amount does the interest tax shield from its debt lower Summit's WACC? WACC is lowered by %. (Round to two decimal places.)
Capital Structure Analysis Pettit Printing Company has a total market value of $100 million, consisting of 1 million shares selling for $50 per share and $50 million of 10% perpetual bonds now selling at par. The company's EBIT is $11.13 million, and its tax rate is 20%. Pettit can change its capital structure by either increasing its debt to 65% (based on market values) or decreasing it to 35%. If it decides to increase its use of leverage, it must...
Pettit Printing Company has a total market value of $100 million, consisting of 1 million shares selling for $50 per share and $50 million of 10% perpetual bonds now selling at par. The company's EBIT is $10.10 million, and its tax rate is 35%. Pettit can change its capital structure either by increasing its debt to 70% (based on market values) or decreasing it to 30%. If it decides to increase its use of leverage, it must call its old...
Markum Enterprises is considering permanently adding an additional $182 million of debt to its capital structure. Markum's corporate tax rate is 30%. a. Absent personal taxes, what is the value of the interest tax shield from the new debt? b. If investors pay a tax rate o 40% on interest income, and a tax rate of 20% on income from dividends and capital gains, what is he value o the interest tax shield from the new debt? a. Absent personal...
Google Corporation has no debt on its balance sheet in 2008, but paid $1.6 billion in taxes. Assume that Google’s marginal tax rate is 35% and Google’s borrowing cost is 7%. Assume that investors hold Google stock in retirement accounts that are free from personal taxes. If Google were to issue sufficient debt to reduce its taxes by $1 billion per year permanently, then the amount that Google needs to borrow is?
Capital Structure Analysis Pettit Printing Company has a total market value of $100 million, consisting of 1 million shares selling for $50 per share and $50 million of 10% perpetual bonds now selling at par. The company's EBIT is $13.95 million, and its tax rate is 40%. Pettit can change its capital structure by either increasing its debt to 55% (based on market values or decreasing it to 45%. If it decides to increase its use of leverage, it must...
Question 11A firm has a market capitalization (market value of equity) of $16 Billion and net debt of $12 Billion. Calculate the weight of debt in the firm's weighted average cos of capital (WACC) calculation. (Note: Enter your answer as a percentage rounded to two decimal places.] Question 12A firm has an effective (after-tax) cost of debt of 3%, and its weight of debt is 40%. Its equity cost of capital is 9%, and its weight of equity is 60%. Calculate...