A similar company with no debt has a cost of equity of 11, Ask an Expert

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Gomez computer systems has EBIT of $200,000, a growth rate of 6%, and faces a tax rate of 40%. In order to support growth, Gomez must reinvest 20% of its EBIT in net operating assets. Gomez has $300,000 in 8% debt outstanding. A similar company with no debt has a cost of equity of 11% (i.e. rEU = 11%). According to the MM extension with growth, what is the value of Gomez's interest tax savings?

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