Restex maintains a debt-equity ratio of 0.85, and has an equity cost of capital of 12% and
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Restex maintains a debt-equity ratio of 0.85, and has an equity cost of capital of 12% and a debt cost of capital of 7%. Restex’s corporate tax rate is 25%, and its market capitalization is
$220 million.
a. If Restex’s free cash flow is expected to be $10 million in one year, what constant expected future growth rate is consistent with the firm’s current market value?
b. Estimate the value of Restex’s interest tax shield.
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Related Book For
Corporate Finance The Core
ISBN: 9781292431611
5th Global Edition
Authors: Jonathan Berk, Peter DeMarzo
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