Question: The CFO of Spotify Inc. has summarized its free cash flows for the next three years in the following table. The cash flows are

The CFO of Spotify Inc. has summarized its free cash flows for

The CFO of Spotify Inc. has summarized its free cash flows for the next three years in the following table. The cash flows are expected to grow at a constant growth rate 2.00% afterwards. The company has been maintaining a costant gearing ratio of 0.25, and has no plans to change this ratio in the future. Under this financing strategy, the cost of equity and cost of debt capitals are, respectively, 12% and 5%. The normative corporate tax rate is 25%. What is the value of Spotify's tax shield? Years FCFS 1 12.70 2 13.30 3 13.60

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