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Business, 23.04.2021 01:50 chambersjamal05

Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $1.67 million per​ year, growing at a rate of 2.6% per year. Goodyear has an equity cost of capital of 8.6%​, a debt cost of capital of 6.6%, a marginal corporate tax rate of 38%​, and a​ debt-equity ratio of 2.6. 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?

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