Mason Medical Supply, Inc. is trying to determine its value if it were to use no debt financing in its capital structure (i.e., its VU). During the most recent fiscal year, the firm generated Free Cash Flow (FCF) of $75 million. Its required rate of return, if it had no debt financing is estimated to be 10%. Its constant annual growth rate is expected to be 4%.

a. Given this information, calculate the unlevered value (VU) of Mason Medical Supply, Inc.

b. Now, assume that Mason Medical Supply, Inc. has a 35% tax rate (T), a 5% cost of debt financing (r d) and $30 million of debt financing in its capital structure. Given this information, calculate the value of Mason Medical Supplys Tax Shield (VTS).

c. Given the calculations that you have completed above in Parts A and B of this problem, what is the value of Mason Medical Supply when it is leveraged and uses debt financing (V L)?