Southside Systems has $350million of outstanding debt with a 6% required rate of return. Southside has a required return on assets of 13%, an EBIT of

$44million, and a corporate tax rate of 20%.

a. Calculate Southside's present value of the debt tax shields and total firm value.

b. Calculate Southside's gain from leverage if there are personal taxes of

27% on stock income and 32% on debt income.

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Part 1

a. Southside's present value of the debt tax shields is

$ enter your response here.

(Round to the nearest dollar.)