Question
4. Assume corporate tax rate is 30% and no personal taxes. Debt is always risk-free. Risk-free rate is 5%. a. Zoom Inc. pays 1 million
4. Assume corporate tax rate is 30% and no personal taxes. Debt is always risk-free. Risk-free rate is 5%. a. Zoom Inc. pays 1 million in interest each year for the next 5 years. What is the present value of Zooms interest tax shield? b. Zoom Inc. will have free cash flow 10 million in the next year and its free cash flow will grow at a rate of 4% per year thereafter. Zoom has a deb tequity ratio of 1, an equity cost of capital of 10%, and a debt cost of capital of 5%. What is the present value of Zooms interest tax shield? c. Zoom Inc. maintains a permanent debt
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