With its current leverage, WELS Corporation will have Free Cash Flow of $4 million. If WELS corporate tax rate is 35% and it pays 8% interest on its debt, how much additional debt can WELS issue this year and still receive the benefit of the interest tax shield next year?
What will be an ideal response?
Divide FCF by the interest rate to calculate the amount of debt that could be issued:
4,000,000/.08 = $50,000,000 in new debt
Business
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What will be an ideal response?
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