I need help with B. What is the total value of the interest tax shield at Year 0? CoursesId Valuetware Development has a 10% 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$70 $85 $125a. What is the horizon value of the interest tax shield? Do not round intermediate calculations. Round your answer to the nearest cent.541.67b. 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.$$Interest expenses

Tax shield refers to the tax benefit arising due to the increase in expenses which in turn decreases…

Answered: Courses ld Value tware Development has…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter21: Dynamic Capital Structures And Corporate Valuation

Section: Chapter Questions

Problem 10SP

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Ogier Incorporated currently has $800 million in sales, which are projected to grow by 10% in Year 1 and by 5% in Year 2. Its operating profitability ratio (OP) is 10%, and its capital requirement ratio (CR) is 80%? What are the projected sales in Years 1 and 2? What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2? What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2? What is the projected FCF for Year 2?
Wilde Software Development has an 11% unlevered cost of equity. Wilde forecasts the following interest expenses, which are expected to grow at a constant 3% rate after Year 3. Wilde's tax rate is 25% Year 1 Year 2 Year 3 Interest expenses $85 $100 $125 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. $
Wilde Software Development has a 10% 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%. Interest expenses Year 1=$70 , Year 2= $85, Year 3= $125. What is the horizon value of the interest tax shield? PLEASE Do not round intermediate calculations And please round the answer to the nearest cent. Please show me the steps I don't know what I'm doing wrong!
Wilde Software Development has a 12% 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 $80 $100 $120 a. What is the horizon value of the interest tax shield? b. What is the total value of the interest tax shield at Year 0?
Start with the partial model in the file Ch21 P08 Build a Model.xlsx on the textbook’s Web site. Kasperov Corporation has an unlevered cost of equity of 12% and is taxed at a 40% rate. The 4-year forecasts of free cash flow and interest expenses are shown in the following table; free cash flow and interest expenses are expected to grow at a 5% rate after Year 4. Using the compressed APV model, answer the following questions. INPUTS (In Millions) Projected Year: 1 2 3 4 Free cash flow $200 $280 $320 $340 Interest expense $100 $120 $120 $140 Calculate the current value of unlevered operations. Calculate the estimated horizon value of the tax shield at Year 4 (i.e., immediately after the Year-4 free cash flow). Calculate the current value of the tax shield. Calculate the current total value.
Vapor Lock Motors’ EBIT is $7,000,000, the company’s interest expense is $2,000,000,and its tax rate is 40 percent. Vapor Lock’s beta is 1.5.a. What is Vapor Lock’s DFL?b. If Vapor Lock were able to grow its EBIT by 50%, what would be the percentageincrease in net income?c. If Vapor Lock were able to grow its EBIT by 50%, what would be the resultingnet income?
Kelly expects its sales to be $20 million this year under its current credit policy. The present terms are net 30; the days dales outstanding (DSO) is 65 days; and the bad debt loss percentage is 4%. Also, Kelly’s cost of capital is 14%, and its variable costs total 62% of sales. Since Kelly wants to improve its profitability, a proposal has been made to offer a 2 percent discount for payment within 10 days; that is, change the credit terms to 2/10, net 30. It is predicted that sales would increase by $600,000, and that 55 percent of all customers would take the discount. The new DSO would be 30 days, and the bad debt loss percentage on all sales would fall to 2 percent. (Hint, use incremental approach table) What are the incremental pre-tax profits from this proposal?
Kelly expects its sales to be $20 million this year under its current credit policy. The present terms are net 30; the days dales outstanding (DSO) is 65 days; and the bad debt loss percentage is 4%. Also, Kelly’s cost of capital is 14%, and its variable costs total 62% of sales. Since Kelly wants to improve its profitability, a proposal has been made to offer a 2 percent discount for payment within 10 days; that is, change the credit terms to 2/10, net 30. It is predicted that sales would increase by $600,000, and that 55 percent of all customers would take the discount. The new DSO would be 30 days, and the bad debt loss percentage on all sales would fall to 2 percent. (Hint, use incremental approach table) What would be the incremental bad debt losses if the change were made? What would be the incremental cost of carrying receivables if the change were made? What are the incremental pre-tax profits from this proposal?

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