Question
Restex has a debt-equity ratio of 0.56, an equity cost of capital of 18%, and a debt cost of capital of 14%. Restex's corporate tax
Restex has a debt-equity ratio of 0.56, an equity cost of capital of 18%, and a debt cost of capital of 14%. Restex's corporate tax rate is 21%, and its market capitalization is $272 million.
a. If Restex's free cash flow is expected to be $3 million one year from now and will grow at a constant rate, what expected future growth rate is consistent with Restex's current market value?
If Restex's free cash flow is expected to be $3 million in one year, the expected future growth rate is...............%. (Round to two decimal places.)
b. Estimate the value of Restex's interest tax shield.
Interest tax shield value is $............million. (Round to the nearest million.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started