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problem: Doubles Company is issuing 10 million dollar debt [$1,000 par per bond] with ten year bonds with 16% yearly coupon rate, even though its [pretax] cost of debt is only 8 percent. The firm’s tax rate is 40%. find out the present value of tax shields.

Also find out the PVTS for $10 million debt if Doubles Co. issues [A] 8% coupon bonds & [B] zero coupon bonds.

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  • Category:- Basic Finance
  • Reference No.:- M919291

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