You are running a major tech company, Technology Innovation Inc. (TIC), and are thinking about investing in electric vehicles (EV) through a new solely owned start-up, TIC2. The new endeavor requires an initial investment of $50.00 billion (year 0) and yields a perpetual pre-tax earnings of $10.00 billion per year, starting the following year (year 1). TIC2's tax rate is 20.00%. TIC is currently all equity financed and can issue new equity to finance the initial investment of TIC2. It can also raise new capital through TIC2 to fund the investment. There is a listed company, eCar, which is in the EV business. You have the following data: BD D/E T TIC 1.00 0.00 0.00 30.00% eCar 1.12 0.24 0.33 20.00% Assume that CAPM is valid, the risk-free interest rate is 1.24%, the risk premium on the market portfolio is 6.89%, and eCar keeps its debt-to-value ratio constant. For parts (A) - (C), suppose you finance the initial investment by issuing equity through TIC2. What is the after-tax cash flow of TIC2 each year? 8 billion dollars Submit You have used 1 of 2 attempts Question 6, Part (B) 0.0/3.0 points (graded) What is the discount rate you should use to value TIC2 after-tax cash flow? 8.9568 % Answer: 7.452397 Save Show answer