What is the horizon value of the interest tax shield

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Tax Shield Value

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. Wilde's tax rate is 25%

                          Year 1             Year 2                Year 3

Interest expense  $80             $100                   $120

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

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

Reference no: EM132674765

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