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Calculate the present value of interest tax shield to SPI based on this bond. ...

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Calculate the present value of interest tax shield to SPI based on this bond.

Question 15 Not yet answered Marked out of 10.00 p Flag question Module 4 - Serpent Tech Incorporation (SPI) issues a two-stage-coupon perpetual bond with the total par value of $1 billion. The coupon rate (paid quarterly with the first coupon payment happening three months from now - the last coupon payment for each year is also included in the income statement used for annual tax calculation purpose) set for the first ten years is 4 percent. After that, the coupon rate will jump to 8%. The YTM of this bond is 10%. Assume a 28 percent marginal corporate tax rate

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