Question
XYZ Co. is evaluating a project with a 3-year life. ABC has Re = 10%, Rd = 6%, and Tc = 20%. Throughout the life
XYZ Co. is evaluating a project with a 3-year life. ABC has Re = 10%, Rd = 6%, and Tc = 20%. Throughout the life of the project, ABC wants to maintain a D/E= 1.
The table below outlines the cash flows from the project. Find the PV of the interest tax shields.
| Year | 0 | 1 | 2 | 3 | |
| FCF | -10 | 10 | 15 | 20 | |
| VL | |||||
| $D | |||||
| iNTEREST PAID | |||||
| TAX SHIELD | |||||
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The Fiscal Impact Handbook
Authors: David Listokin
1st Edition
1138535672, 978-1138535671
