The plant for the divestiture to be profitable

Assignment Help Financial Management

Reference no: EM131523740

Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $ $1.43million per year, growing at a rate of 2.5%per year. Goodyear has an equity cost of capital of 8.7%,a debt cost of capital of 7.1%,a marginal corporate tax rate of 34%,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: EM131523740

Questions Cloud

Risk-free technology-provide perpetual annual cash flow : You can invest in a risk-free technology that requires an upfront payment of $1 million and will provide a perpetual annual cash flow of $80,000.

Currency of our northern neighbor : If we expect our currency to appreciate with respect to the currency of our Northern neighbor and the interest rates

Create one research question on the topic of the article : Create one research question on the topic of the article that could be answered y social research and state it

Which of the given is a graphical summary of a set of data : Which of the following is a graphical summary of a set of data in which each data value is represented by a dot above the axis?

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

What is your portfolio return : At the beginning of the month, you owned $4,900 of News Corp, $8,800 of First Data, and $6,300 of Whirlpool. What’s your portfolio return?

Conduct a comparison of the reserve ratios : Conduct a comparison of the reserve ratios in China and the US. Identify what is different.

How the restaurants compare on the variety objective : Stacy Ennis eats lunch at a local restaurant two or three times a week. In selecting a restaurant on a typical workday, Stacy uses three criteria.

What are the factors associated with online purchase : Write a Method section for the paper based on the following research question: "What are the factors associated with online purchases?

User Account

All Pages