eBook Problem Walk$-$Through

Tax Shield Value

Wilde Software Development has an $11\%$ unlevered cost of equity. Wilde forecasts the following interest expenses, which are expected to grow at a constant $5\%$ rate after Year $3.$ Wilde's tax rate is $25\%.$

Year $1$ Year $2$ Year $3$

Interest expenses $$70$ $$105$ $$120$

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.