3. Problem 22-03 (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 4% rate after Year 3. Wilde’s tax rate is 25%.
Year 1 Year 2 Year 3 Interest expenses
$70 $95 $140
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.
$