Goodyear plans to maintain constant debt-equity ratio

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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 $1.69 million per? year, growing at a rate of 2.6% per year. Goodyear has an equity cost of capital of 8.5%?, a debt cost of capital of 6.8%?, a marginal corporate tax rate of 33%?, and a? debt-equity ratio of 2.3.

If the plant has average risk and Goodyear plans to maintain a constant debt-equity ratio, what after-tax amount must it receive for the plant for the divestiture to be profitable?

Question to be answered: A divestiture would be profitable if Goodyear received more than _______ million after tax.???(Round to one decimal? place.)

Reference no: EM132040835

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