According to MM assuming taxes, what is the present value of the debt tax shield assuming a constant capital structure? Single choice

A

Corporate Tax Rate X Value of Debt

B

Corporate Tax Rate X Cost of Debt X Value of Debt

C

Corporate Tax Rate X Cost of Debt

D

Corporate Tax Rate / Cost of Debt

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Question20 Orion Health Corp. has a share price of $18.60 and 24.5 million shares outstanding. The corporate tax rate is 28%. The firm issues $120 million of perpetual debt at 4.5% and uses the proceeds to repurchase shares. Note: Enter answers in millions of dollars, rounded to two decimal places. Example: Enter 1.25 instead of $1,250,000. a) Calculate the annual before tax interest payment. $[input] million b) Calculate the present value of the interest tax shield. $[input] million c) Calculate the value of the firm after the recapitalisation (ignoring financial distress costs). $[input] million After the announcement, the share price increases to $19.10. d) Calculate the present value of expected financial distress costs. $[input] million ResetMaximum marks: 4 Flag question undefined [input]

What is the present value of the debt tax shield if the cost of debt is 10%, value of the debt is $199 million, and corporate tax rate is 32%? Enter and round your answer to the nearest one-hundredth of a million dollars.  Do not include the dollar sign ($).

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