Question
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%
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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Economics Of Money Banking And Financial Markets
Authors: Frederic S. Mishkin
6th Edition
0321113624, 978-0321113627
