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    PV of firm's tax shield and MM hypothesis

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    Your firm has debt worth $200,000, with a yield of 9 percent, and equity worth $300,000. It is growing at a 4 percent rate, and faces a 40 percent tax rate. A similar firm with no debt has a cost of equity of 12 percent. Under the MM extension with growth, what is the value of your firm's tax shield?

    © BrainMass Inc. brainmass.com June 3, 2020, 7:01 pm ad1c9bdddf
    https://brainmass.com/business/accounting/pv-of-firm-s-tax-shield-and-mm-hypothesis-83708

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    Debt amount = $200000
    Yield = 9%
    Interest Payment = 9%*200000=18000
    Tax rebate on interest ...

    $2.19

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