Wilde Software Development has a 12% unlevered cost of equity. Wilde forecasts the following interest expenses, which are expected to grow at a constant 4%

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Wilde Software Development has a 12% unlevered cost of equity. Wilde forecasts the following interest expenses, which are expected to grow at a constant 4% rate after Year 3. Wildes tax rate is 25%.

Year 1 Year 2 Year 3

Interest Expenses 80 100 120

a. What is the horizon value of the interest tax shield?

b. What is the total value of the interest tax shield at Year 0?

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