Receive for the plant for the divestiture to be profitable

Assignment Help Financial Management

Reference no: EM131965856

Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $1.49 million per year, growing at a rate of 2.4% per year. Goodyear has an equity cost of capital of 8.4%, a debt cost of capital of 6.9%, a marginal corporate tax rate of 34%, and a debt-equity ratio of 2.5. 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? Please show solution as I keep making a mistake.

Reference no: EM131965856

Questions Cloud

Expected to generate no cash flows for several years : A building is expected to generate no cash flows for several years and then generate annual cash flows forever.

You are able to buy your dream car after graduation : How much do you need to invest today so that you are able to buy your dream car after graduation?

Plans to repay this loan by making special payment : Grace just borrowed 215,539 dollars. She plans to repay this loan by making a special payment of 18,778 dollars in 7 years and by making regular annual payments

What is present value of annual cash flow : What is the present value of the annual cash flow that is expected in 6 years from today?

Receive for the plant for the divestiture to be profitable : What after-tax amount must it receive for the plant for the divestiture to be profitable?

The expected return for the investment : The expected return for the investment is 8.64 percent per year. What is X, the amount of the special payment that will be made to Sasha in 4 years?

Which is the same as the bonds per value bond coupon : Ford issues a coupon bond $1,000 which is the same as the bonds per value bond coupon 7%, pays coupon once per year and maturity of 20 years.

Explain exactly what specific currency risk importer faces : Explain exactly what specific currency risk (transaction exposure) this importer faces. completely labeled profit/loss payoff diagram for importer’s call option

Report ford total profit or loss on futures contract : Calculate and report Ford’s total profit or loss on the futures contracts, and state whether it is a profit or loss.

User Account

All Pages