How much value does the use of debt add

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A local firm has debt worth $200,000, with a yield of 9%, and equity worth $300,000. It is growing at a 5% rate, and its tax rate is 40%. A similar firm with no debt has a cost of equity of 12%.

Under the MM extension with growth, what is the value of your firm's tax shield, i.e., how much value does the use of debt add?

Reference no: EM131321757

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