A firm will issue 800 million dollars of debt outstanding. …
A firm will issue 800 million dollars of debt outstanding. The firm says it will pay off 400 million of the debt at the end of one year and the other 400 million dollars at the end of year two. The interest rate is 5% and the tax rate is 25%. Assuming no chance of default and full use of tax deductions and ignoring personal taxes what is the present value of the tax savings (PVTS) from issuing this debt in millions of dollars. (Give answer rounded to at least the second decimal in millions of dollars: So, for example if answer is 1.243 million, your should write down 1.24 or 1.243)