I was wondering why Equity Value is not FCFF-MV(Debt)*(1-t) ?
the book says EV=FCFF-MV(Debt)
If you issue $10,000,000 in zero-coupon bonds that mature on June 23, 2018, and the tax rate is 30%, how much are you going to have to pay your bondholders on exam day?
EV = Equity value (market cap) + market value of debt - cash & short term investments + minority interest + preffered equity + finance leases …
Generally viewed: EV= equity + net debt (debt - cash)
FCFF= EV
FCFE = Equity value
You are confusing the tax shield you get when you issue debt (not available for all countries) and the market value of debt. Additionally if the tax shield is what worries you, look into the FCFF formula and you will see that you already have it within the interest expense (1-t).
Hope this helps