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Homework answers / question archive / Tatum Co
Tatum Co. has a 25 percent tax rate. Its total interest payment for the year just ended was $30.3 million. What is the interest tax shield? (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, and round your answer to the nearest whole number, e.g., 1,234,567.)
Computation of Interest Tax Shield:
GIven,
Total Interest Payment = $30.3 million
Tax Rate = 25%
Interest Tax Shield = Interest Expenses*Tax rate
= $ 30.3 million*25%
Interest Tax Shield = $7.575 millions or $7,575,000.
