Johns Hopkins UniversityBUSINESS Corporate LAC Corp

Subject:BusinessPrice:3.87 Bought7

Share With

Johns Hopkins UniversityBUSINESS Corporate

LAC Corp. has a free cash flow (FCF) this year of $ 6 million, and the FCF will grow at 4% a year. LAC has both debt and equity, and LAC's capital structure will remain stable. The pretax WACC of LAC is 10% and the after tax WACC is 9%.

What is the present value of LAC's interest tax shield from the use of debt??