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In Discount Projected Tax Savings in the Adjusted Present Value

Question 15

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In discount projected tax savings in the adjusted present value method,the firm's unlevered cost of equity should be used,since it reflects a higher level of risk than either the WACC or after-tax cost of debt.Tax savings are subject to risk comparable to the firm's cash flows in that a highly leveraged firm may default and the tax savings go unused.

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