What is the present value of fords interest tax shield

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Reference no: EM131331064

Ford expects to earn a free cash flow of $100, starting in 1 year, forever. The discount rate on the assets of the firm is 18%. Further, Ford has issued debt of $1,000 at an interest rate and yield-to-maturity of 5%. Ford will perpetually roll this $1,000 in debt over, so that it always has a constant $1,000 in debt forever and always expects to pay 5% interest on this debt. Finally, Ford has a tax rate of 30%. What is the present value of Ford’s interest tax shield?

Reference no: EM131331064

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