1. Flagstaff Enterprises is expected to have a free cash flow next year of 8 million, and this free cash flow is expected to grow at a rate of 3% per year thereafter. Flagstaff has an equity cost of capital of 13%, a debt cost of capital of 7%, and it is in the 35% corporate tax bracket. If Flagstaff currently maintains a 0.8 debt to equity ratio, then calculate the value of Flagstaff's interest tax shield. Please round your answer to the nearest 0.01.

[5 marks]

A. 18.00 million

B. 19.02 million

C. 20.05 million

D. 21.07 million

E. None of the above