Question - Markum Enterprises is considering permanently adding an additional $71 million of debt to its capital structure. Markum's corporate tax rate is 38%.
a. Absent personal taxes, what is the value of the interest tax shield from the new debt?
b. If investors pay a tax rate of 45% on interest income, and a tax rate of 30% on income from dividends and capital gains, what is the value of the interest tax shield from the new debt?