The Weighted Average Cost of Capital MethodSuppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $1.5 million per year growing at a rate of 2.5% per year. Goodyear has an equity cost of capital of 8.5% a debt cost of capital of 7% a marginal corporate tax rate of 35% and a debt-equity ratio of 2.6. 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?Suppose Alcatel-Lucent has an equity cost of capital of 10% market capitalization of $10.8 billion and an enterprise value of $14.4 billion. Suppose Alcatel-Lucents debt cost of capital is 6.1% and its marginal tax rate is 35%.Year0123FCF1005010070
The Weighted Average Cost of Capital MethodSuppose Goodyear Tire and Rubber Comp
by Morris Graham | Sep 23, 2017 | Uncategorized | 0 comments