The Weighted Average Cost of Capital MethodSuppose Goodyear Tire and Rubber Comp

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