The value of a growing tax shield is greater than the value of a constant tax shield. This means that for a given initial level of debt a growing firm will have more value from the debt tax shield than a non-growing firm. Thus for a given face value of debt, \(\mathrm{D}\), and unlevered value of equity, \(\mathrm{U}\), a growing firm will have a smaller \(\mathrm{w}_{\mathrm{D}}\), a larger levered cost of equity, \(\mathrm{r}_{\mathrm{eL}}\), and a larger WACC. So the MM model will underestimate the value of the levered firm and its cost of equity and WACC.