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Receive for the plant for the divestiture to beprofitable

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Reference no: EM131412068

Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $ $1.53 million peryear, growing at a rate of 22.3% per year. Goodyear has an equity cost of capital of 88.4%, a debt cost of capital of 6.8 %6.8%, a marginal corporate tax rate of 37%, 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.)

Reference no: EM131412068

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