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What is the horizon value of the interest tax shield

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Reference no: EM133179717

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 5% rate after Year 3. Wilde's tax rate is 25%.

 

Year 1

Year 2

Year 3

Interest expenses

$75

$110

$125

Required -

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?

Reference no: EM133179717

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