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What is the horizon value of the interest tax shield

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Reference no: EM133117856

Question - Wilde Software Development has a 9% 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 expenses

$85

$100

$130

Required -

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

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

Reference no: EM133117856

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