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What is the value of your firms tax shield

Problem: 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?

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## Q : Compute how much new car can cost based on income constraint

Your annual income is $50,000 before taxes which is taxed at a flat rate of 30%. Of the after tax income you can commit 25% annually towards the purchase of the car for the next 5 years (starting 1 year from today).