Google Corporation has no debt on its balance sheet in 2008, but paid $1.6 billion in taxes. Assume that Google’s marginal tax rate is 35% and google’s borrowing cost is 7%.Assume that investors hold Google stock in retirement accounts that are free from personal taxes. If Google were to issue sufficient debt to reduce its taxes by $600 million per year permanently, then what is the value that would be created?
Google Corporation
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