If Flagstaff currently maintains a debt to equity ratio of 1,then the value of Flagstaff's interest tax shield is closest to:

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Quizplus · Accepted Answer

D)r_wacc = 11ea7cce_3ce7_73a9_928c_afb4339e60e1_TB1626_11 r_E + 11ea7cce_3ce7_9aba_928c_ab826ae80c7c_TB1626_11 r_D_{(Pre tax)} r_wacc = 11ea7cce_3ce7_9abb_928c_451925c206d6_TB1626_11 .13 + 11ea7cce_3ce7_9abc_928c_6bc8b3620284_TB1626_11 .07 = .10 V^{U =} 11ea7cce_3ce7_c1cd_928c_5d309064984a_TB1626_11 = 11ea7cce_3ce7_c1ce_928c_93a817206158_TB1626_11 = $114.29 million r_wacc = 11ea7cce_3ce7_c1cf_928c_0bde15cc6227_TB1626_11 r_E + 11ea7cce_3ce7_e8e0_928c_ef4344de7910_TB1626_11 r_D(1 - τ_c) r_wacc = 11ea7cce_3ce7_e8e1_928c_a1f7f3e92a58_TB1626_11 .13 + 11ea7cce_3ce7_e8e2_928c_eb463a67430c_TB1626_11 .07 (1 - .35)= .087750 V^{L =} 11ea7cce_3ce8_0ff3_928c_13b99c086434_TB1626_11 = 11ea7cce_3ce8_0ff4_928c_3f5393435820_TB1626_11 = $138.53 million PV of tax shield = V^{L - VU} = $138.53 - $114.29 = $24.24

If Flagstaff Currently Maintains a Debt to Equity Ratio of 1,then