Question
20) Western Lumber Company expects to have free cash flow in the coming year of $4.25 million, and its free cash flow is expected to
20) Western Lumber Company expects to have free cash flow in the coming year of $4.25 million, and its free cash flow is expected to grow at a rate of 4% per year thereafter. Western Lumber has an equity cost of capital of 10% and a debt cost of capital of 6%, and it pays a corporate tax rate of 21%. If Western Lumber maintains a debt-equity ratio of 0.50, what is the value of its interest tax shield? A) $9 million. B) $12 million. C) $10 million. D) $5 million
The answer is A I need to know the calculation. please don't use excel please thank you!
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