Question
Acme Storage has a market capitalization of $129 million, and debt outstanding of $167 million. Acme plans to maintain this samedebt-equity ratio in the future.
Acme Storage has a market capitalization of $129 million, and debt outstanding of $167 million. Acme plans to maintain this samedebt-equity ratio in the future. The firm pays an interest of 6.9% on its debt and has a corporate tax rate of 21%.
a. IfAcme's free cash flow is expected to be $17.76 million next year and is expected to grow at a rate of 3% peryear, what isAcme's WACC?
b. What is the value ofAcme's interest taxshield?
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Valuation Measuring and managing the values of companies
Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel
5th edition
978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470
