medium · Investment Banking ma-lbo
Company A acquires Company B in an all-cash deal for $1,000M. To fund this, Company A uses $200M of its own cash and issues $800M in new debt at a 5.0% pre-tax interest rate. Company A's marginal tax rate is 40%.
What is the annual after-tax cost of this acquisition to Company A, excluding the target's earnings?
- $24M
- $50M
- $30M
- $40M
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