Present value of the interest tax shield, Accounting Basics

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Present value of the interest tax shield

Problem:

Kelner's Nursery has 8,000 bonds outstanding with a face value of $1,000 each. The coupon rate is 6.5 percent and the tax rate is 34 percent.

Required:

Question: What is the present value of the interest tax shield?

Note: Provide support for rationale.

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Accounting Basics: Present value of the interest tax shield

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Accounting Basics: Present value of the interest tax shield

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