Question
Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $1.64million
Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $1.64million peryear, growing at a rate of 2.4%per year. Goodyear has an equity cost of capital of 8.5%,a debt cost of capital of 6.7 %
a marginal corporate tax rate of 32 %and adebt-equity ratio of 2.8
If the plant has average risk and Goodyear plans to maintain a constantdebt-equity ratio, whatafter-tax amount must it receive for the plant for the divestiture to beprofitable?
A divestiture would be profitable if Goodyear received more than____$nothing million after tax.(Round to one decimalplace.)
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