Question
I am still stuck on the textbook simulator question. The simulator provided the calculations to the correct answer and my answer is incorrect. I am
I am still stuck on the textbook simulator question. The simulator provided the calculations to the correct answer and my answer is incorrect. I am unable to determine how they came up with the answers as it does not appear that each step is available (so I can figure out where I missed the step). I have changed the name and numbers so that I am not writing the problem from the simulator verbatim:
Kennedy Technologies has a 15% unlevered cost of equity. Kennedy forecasts the following interest expense, which are expected to grow at a constant 2% rate after Year 3. Kennedy's tax rate is 30%. The interest expenses: Year 1 = $50.00, Year 2 = $110.00, Year 3 = $150.00. What is the horizon value of the interest tax shield? What is the total value of the interest tax shield at Year 0?
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