The plant for the divestiture to be? profitable

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Reference no: EM131920088

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 2.3 % per year. Goodyear has an equity cost of capital of 8.7 %?, a debt cost of capital of 6.9 %?, a marginal corporate tax rate of 33 %?, and a? debt-equity ratio of 2.7. 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?

Reference no: EM131920088

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