In the Year Ending October 2007,Walmart Paid Out $1,929 Million

question 99

Essay

In the year ending October 2007,Walmart paid out $1,929 million as debt interest.
How much more tax would Walmart have paid if the firm had been entirely equity-financed? What would be the present value of Walmart's interest tax shield if the company planned to keep its borrowing permanently at the 2007 level? Assume an interest rate of 6% and a corporate tax rate of 35%.

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Definitions:

Z-scores

A statistical measurement of a score’s relationship to the mean in a group of scores, indicating how many standard deviations an element is from the mean.

Standard Normal Distribution

A probability distribution that has a mean of zero and a standard deviation of one, commonly represented in statistics.

Less Than

A mathematical comparison indicating that one value is smaller than another.

Z-scores

Scores that are normalized to show the number of standard deviations a data point is away from the average.