Maintain a constant? debt-equity ratio

Assignment Help Finance Basics
Reference no: EM133073404

Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $1.61 million per? year, growing at a rate of 2.6% per year. Goodyear has an equity cost of capital of 8.6%?, a debt cost of capital of 6.7%?, a marginal corporate tax rate of 38%?, and a? debt-equity ratio of 2.7. If the plant has average risk and Goodyear plans to maintain a constant? debt-equity ratio, what? after-tax amount must it receive for the plant for the divestiture to be? profitable?

A divestiture would be profitable if Goodyear received more than ?$----------------- million after-tax.  ?(Round to one decimal? place.)

Reference no: EM133073404

Questions Cloud

Advise on the best time for blossom industries : Blossom Industries recently bought a company and wants to determine the optimal time to sell it. The partner in charge of this investment has estimated the afte
Acquisition of pacificorp by berkshire hathaway : Market reaction: What does the stock market seem to say about the acquisition of PacifiCorp by Berkshire Hathaway?
Disability encounter reaction : Interview a person with a disability and provide transcript. Read a first-person account of a person with a disability.
What is the quoted apr of mortgage : What is the quoted APR (compounded semi-annually) of this mortgage?
Maintain a constant? debt-equity ratio : Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $1.61 mi
Produce cash inflows : Wilson's Market is considering two mutually exclusive projects. The required rate of return is 8% for Project A and 10% for Project B. Project A has an initial
How much money per share will you receive : You are an investor in Morgan Sachs. Morgan Sachs earns $3.00 per share after tax and distributes all of its earnings to its shareholders in the form of a divid
Know yourself- personal or professional life : Describe two areas of your life where you see room for improvement. What kind of VALUES do you think someone whom you look up has and why?
Systematic risk measure for archer daniels midland : The goal of this exercise is to use stock price data to calculate the beta (systematic risk measure) for Archer Daniels Midland (ADM).

Reviews

Write a Review

Finance Basics Questions & Answers

  Compare with aig traditional insurance activities

AIG has been successful in its traditional insurance activities such as property and casualty or life insurance. Why did AIG fail in CDS business. How did AIG's

  Overview of islamic finance in the global history of

overview of islamic finance in the global?history of islamic finance?how it works?countries that use islamic

  Calculating interest rates and future values

In the following question can you please explain what the 41 and 31 are in the solution (the t)

  Calculate the expected return on ben portfolio

a) Calculate the expected return on Ben's portfolio. Show full working.

  What is the equity multiplier

Rainbow company has a debt-equity ratio of 1.25. Return on assets is 7.5%, and total equity is $625,000. What is the equity multiplier? Return on equity? Net income?

  How much gain should vorst record

Vorst depreciates Asset C by the straight- line method. On June 30, 2017, vorst sold Asset C for $28,000 cash. How much gain (loss) should Vorst record in 2017.

  Termination of a key employee in company

1. An employee at your company recently assumed a supervisory position and started taking a different staff member to lunch each week to try and build rapport.

  What is the present value of the growing perpetuity

You are evaluating a growing perpetuity product from a large financial services firm. The product promises an initial payment of $21,000 at the end of this year

  How can the chinese exporter hedge payable

The interest rate in China is 5% and in the US it is 3%. How can the Chinese exporter hedge this payable?

  If the firm has revenues of 15090 operating expenses of

1. if a firm has an accounts receivable balance of 18800 at the end of 2007 and 16500 at the end of 2008 which of the

  Explain the current value and modified duration

You are a fixed-income portfolio manager, and you have a very simple portfolio consisting of 5-year U.S. Treasury strips (zero coupon bonds) with a total face v

  What are the advantages and disadvantages of conducting a

what are the advantages and disadvantages of conducting a face-to-face interview compared with a less personal approach

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd