What is the value of acme''s interest tax shield

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Reference no: EM13295744

Acme Storage has a market capitalization of $100 million and debt outstanding of $40 million. Acme plans to maintain this same debt-equity ratio in the future. The firm pays an interest rate of 7.5% on its debt and has a corporate tax rate of 35%.
a. If Acme's free cash flow is expected to be $7 million next year and is expected to grow at a rate of 3% per year, what is Acme's WACC?
b. What is the value of Acme's interest tax shield?

Reference no: EM13295744

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