Question
Acme Storage has a market capitalization of $111 million, and debt outstanding of $159 million. Acme plans to maintain this same debt-equity ratio in the
Acme Storage has a market capitalization of $111 million, and debt outstanding of $159 million. Acme plans to maintain this same debt-equity ratio in the future. The firm pays an interest of 6.7% on its debt and has a corporate tax rate of 35%.
a. If Acme's free cash flow is expected to be $10.80 million next year and is expected to grow at a rate of 6% per year, what is Acme's WACC?
b. What is the value of Acme's interest tax shield?
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Cornerstones Of Financial Accounting
Authors: Bertrand Piccard, Jay Rich, Jeff Jones, Maryanne Mowen, Don Hansen, Nick Jones
1st Edition
0324657730, 9780324657739
