Question: ABC Industries is considering a 3-year project that will cost $200 today followed by free cash flows to firm of $100 in year 1, $80

ABC Industries is considering a 3-year project that will cost $200 today followed by free cash flows to firm of $100 in year 1, $80 in year 2, and $160 in year 3. ABC has $1000 of assets with a debt ratio of 40.00%. ABC's before-tax cost of debt is 6.00% and its cost of equity is 11.00%. Suppose that to fund this new project, ABC borrows $120which it will pay back at the end of the 3 year life of the project. Assuming the tax rate is 35.00% the present value of ABC's interest tax shield is closest to: Group of answer choices

$6.74

$7.72

$8.40

$11.34

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