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What is the horizon value of the interest tax shield

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Reference no: EM133051899

Question - Wilde Software Development has an 11% unlevered cost of equity. Wilde forecasts the following interest expenses, which are expected to grow at a constant 5% rate after Year 3. Wilde's tax rate is 25%.

 

Year 1

Year 2

Year 3

Interest expenses

$80

$105

$130

Required -

1. What is the horizon value of the interest tax shield? Do not round intermediate calculations.

2. What is the total value of the interest tax shield at Year 0? Do not round intermediate calculations.

Reference no: EM133051899

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