Value the tax shieldyour firm has a debt to equity ratio of, Ask an Expert

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Value the tax shield

Your firm has a debt to equity ratio of 0.3 and next year’s cash flow should be 39 million which is growing at a 2% rate. The current debt cost of capital is 6%, the equity cost of capital is 20% and the appropriate tax rate is 35%.

A) What is the firm’s unlevered cost of capital?

B) What is the firm’s wacc given the current capital structure?

C) Solve for the firm’s present value of the tax shield.

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Financial Accounting, Accounting

Category:- Financial Accounting
Reference No.:- M92090958

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