Simple RI

In $2014,$ American Faucet Corporation $($AFC$)$ had earnings before interest and taxes of $$250$ million. AFC is subject to

a tax rate of $37$ percent. The book value and market value of AFC's common equity at the beginning of $2014$ was

$$500$ million and $$350$ million, respectively. AFC's debt had a book value of $$250$ million at the beginning and end of

$2014$ and the company pays $9$ percent interest on its debt. The company's cost of equity capital is estimated to be

$11\mathrm{.}5$ percent. Based on this information, AFC's residual income will be closest to:

$

million

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