Ford expects to earn a free cash flow of $100, starting in 1 year, forever. The discount rate on the assets of the firm is 18%.

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Ford expects to earn a free cash flow of $100, starting in 1 year, forever.  The discount rate on the assets of the firm is 18%.  Further, Ford has issued debt of $1,000 at an interest rate and yield-to-maturity of 5%.  Ford will perpetually roll this $1,000 in debt over, so that it always has a constant $1,000 in debt forever and always expects to pay 5% interest on this debt.  Finally, Ford has a tax rate of 30%.  What is the present value of Ford's interest tax shield? 0 15 83 300

Question

Ford expects to earn a free cash flow of $100, starting in 1 year, forever. The discount rate on the assets of the firm is 18%.

  • Written in: 17-Oct-2019
  • Paper ID: 377512
Price: $ 15
 

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DATE ANSWERED

Oct 17, 2019

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