Tax Shield Assignment | Homework For You
January 29th, 2020
Problem 5B: 6 Points
A company has $1,000 of assets. It decides to increase its debt/total assets ratio from 25% to 50% by a share repurchase. The company’s tax rate is 30%.
4. How much is the tax shield at 25% debt 2 points
5. How much is the tax shield at 50% debt? 2 points
2. Six months after the increase in leverage, its tax rate falls from 30% to 15%. As a result of the tax rate decline Its share price at 50% debt and 15% tax rate will be 2 points
A. the same as it was at 25% debt and 30% tax rate
B. higher than it was at 25% debt and 30% tax rate
C. lower than it was at 25% debt and 30% tax rate. Get Finance homework help today