6. Restex maintains a debt-equity ratio of 0.85, and has an equity cost of capital of 12%, and a debt cost of capital of 7%. Restexs corporate tax rate is 40%, and its market capitalization is $220 million.

(a) If Restexs free cash flow is expected to be $10 million in one year, what constant expected future growth rate is consistent with the firms current market value?

(b) Estimate the value of Restexs interest tax shield.