Wilde Software Development has a 9% unlevered cost of equity. Wilde forecasts the following interest expenses, which are expected to grow at a constant 3% rate after Year 3. Wilde's tax rate is 25%. Year 1 Year 2 Year 3 Interest expenses $90 $120 $160 What is the horizon value of the interest tax shield? Do not round intermediate calculations. Round your answer to the nearest cent. $ _________ What is the total value of the interest tax shield at Year 0? Do not round intermediate calculations. Round your answer to the nearest cent. $ ________
Wilde Software Development has a 9% unlevered cost of equity. Wilde forecasts the following interest expenses, which are expected to grow at a constant 3% rate after Year 3. Wilde's tax rate is 25%. Year 1 Year 2 Year 3 Interest expenses $90 $120 $160 What is the horizon value of the interest tax shield? Do not round intermediate calculations. Round your answer to the nearest cent. $ _________ What is the total value of the interest tax shield at Year 0? Do not round intermediate calculations. Round your answer to the nearest cent. $ ________
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter21: Dynamic Capital Structures And Corporate Valuation
Section: Chapter Questions
Problem 10SP
Related questions
Question
3) Wilde Software Development has a 9% unlevered
Year 1 | Year 2 | Year 3 | |
Interest expenses | $90 | $120 | $160 |
-
What is the horizon value of the interest tax shield? Do not round intermediate calculations. Round your answer to the nearest cent.
$ _________
-
What is the total value of the interest tax shield at Year 0? Do not round intermediate calculations. Round your answer to the nearest cent.
$ ________
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