a. Computation of Horizon Value of the Interest Tax Shield:

= [ Interest expense in year 3 * Tax Rate * (1 + Growth Rate) ] / (Unlevered Cost of Equity - Growth Rate) ]

= [ $135 * 0.25 * 1.02 ] / (0.12 - 0.02)

= $34.425 / 0.10

= $344.25

b. Computation of Total Value of Interest Tax Shield:

= (Interest expense in year 1 * Tax rate) / (1 + Unlevered cost of equity) + (Interest expense in year 2 * Tax rate) / (1 + Unlevered cost of equity)^2 + (Interest expense in year 3 * Tax rate) / (1 + Unlevered cost of equity)^3 + 1 / (1 + Unlevered cost of equity)^3 * Horizon value

= ($75 * 0.25) / 1.12 + ($100 * 0.25) / 1.12^2 + ($135 * 0.25) / 1.12^3 + 1 / 1.12^3 *  $344.25

= $ 18.75 / 1.12 + $ 25 / 1.12^2 + $33.75/ 1.12^3 +  $344.25 / 1.12^3

= $18.75 / 1.12 + $25/ 1.12^2 + $378 / 1.12^3

= $305.72