Tatum Co

Finance Oct 30, 2020

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.)

Expert Solution

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.

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