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Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $
Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $ million per year, growing at a rate of per year. Goodyear has an equity cost of capital of a debt cost of capital of a marginal corporate tax rate of and a debtequity ratio of If the plant has average risk and Goodyear plans to maintain a constant debtequity ratio, what aftertax amount must it receive for the plant for the divestiture to be profitable?
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