Problem
Beta Industries has a market capitalization of $150 million and debt outstanding of $50 million. Beta plans to maintain this same debt-equity ratio (not same $ amiount of debt) in the future. The firm pays an interest rate of 7.5% on its debt and has a corporate tax rate of 35%. If Beta's free cash flow is expected to be $25 million next year and is expected to grow at a rate of 3% per year, what is the total present value of Beta's interest tax shields?