Examlex
How do corporate income taxes modify MM's leverage irrelevance proposition?
D. Future interest tax shields are usually valued by discounting at the borrowing rate rdebt. In the special case of permanent debt,
PV tax shield = Tc(rdebt × D)/rdebt = TcD
Real Rate
The interest rate adjusted for inflation, reflecting the real purchasing power of interest earnings.
Nominal Rate
The interest rate before adjusting for inflation, reflecting the percentage that is paid for the use of money.
Price Level
Refers to the average of the current prices of goods and services in the economy.
Interest
Payment received for the use of borrowed money, or the money paid for taking out a loan, often expressed as a percentage.
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