Question: eBook Problem Walk - Through Tax Shield Value Wilde Software Development has a 1 4 % unlevered cost of equity. Wilde forecasts the following interest

eBook Problem Walk-Through
Tax Shield Value
Wilde Software Development has a 14% 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 $80 $100 $115
a.What is the horizon value of the interest tax shield? Do not round intermediate calculations. Round your answer to the nearest cent.
$
b.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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