Step 2: Add PV(Tax Shield of Debt)
{"Image DocumentName": "Step 2: Add PV(Tax Shield of Debt)", "Image ImageDescription": "\u2027 Cash-flow: The expected tax saving is tkDD where k0 is the cost of debt capital (discussed earlier). \u2027 If D is expected to remain stable, then discount tkDD using k0 PVTS = tkDD/ k0= tD. \u2027 If DN is expected to remain stable, then discount tkDD using kA. PVTS = tkDD/ kA. \u2027 Intuition: \u2014  If D/V is constant, D (tk0D) and thus moves up/down with V. \u2014The risk of tkDD is similar to that of the firm\u2019s assets: use kA.", "Image XResolution": "37", "Image YResolution": "37", "Image ResolutionUnit": "Pixels/Centimeter", "Image Software": "SlidePlayer", "Image YCbCrPositioning": "Centered"}