When we relax the assumption of a constant debt-equity ratio, the FTE method is relatively straightforward to use and is therefore the preferred method with alternative leverage policies.
B.
When debt levels are set according to a fixed schedule, we can discount the predetermined interest tax shields using the debt cost of capital, rD .
C.
With a constant interest coverage policy, the value of the interest tax shield is proportional to the project's unlevered value.
D.
When the firm keeps its interest payments to a target fraction of its FCF, we say it has a constant interest coverage ratio.