Symual Co. keeps a constant debt-to-ratio policy. The company has an expected EBITDA that perpetually grows at a 2% annu
Posted: Sat Nov 27, 2021 5:34 pm
Symual Co. keeps a constant debt-to-ratio policy. The company
has an expected EBITDA that perpetually grows at a 2% annual rate.
All the assets are fully depreciated. At the moment the
debt-to-equity ratio is 1/3 and the cost of debt is 3.75%. The
unlevered value of the firm is 13,759,800 and the unlevered return
on equity is 8.45%. If the tax rate is 29%, what is the present
value of the interest rate tax shield?
I know that the answer is: 605,514.72 and not in the
millions.
How do you derive this?
has an expected EBITDA that perpetually grows at a 2% annual rate.
All the assets are fully depreciated. At the moment the
debt-to-equity ratio is 1/3 and the cost of debt is 3.75%. The
unlevered value of the firm is 13,759,800 and the unlevered return
on equity is 8.45%. If the tax rate is 29%, what is the present
value of the interest rate tax shield?
I know that the answer is: 605,514.72 and not in the
millions.
How do you derive this?