FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Am.204.

Restex has a debt-equity ratio of 0.56, an equity cost of capital of 13%, and a debt cost of capital of 9% Restex's corporate tax rate is 20%, and its market capitalization is $153 million
a. If Restex's free cash flow is expected to be $4 million one year from now and will grow at a constant rate, what expected future growth rate is consistent with Restex's current
market value?
b. Estimate the value of Restex's interest tax shield.
a. If Restex's free cash flow is expected to be $4 million one year from now and will grow at a constant rate, what expected future growth rate is consistent with Restex's current
market value?
If Restex's free cash flow is expected to be $4 million in one year the expected future growth rate is
b. Estimate the value of Restex's interest tax shield.
% (Round to two decimal places.)
Interest tax shield value is S
million (Round to the nearest million)
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Transcribed Image Text:Restex has a debt-equity ratio of 0.56, an equity cost of capital of 13%, and a debt cost of capital of 9% Restex's corporate tax rate is 20%, and its market capitalization is $153 million a. If Restex's free cash flow is expected to be $4 million one year from now and will grow at a constant rate, what expected future growth rate is consistent with Restex's current market value? b. Estimate the value of Restex's interest tax shield. a. If Restex's free cash flow is expected to be $4 million one year from now and will grow at a constant rate, what expected future growth rate is consistent with Restex's current market value? If Restex's free cash flow is expected to be $4 million in one year the expected future growth rate is b. Estimate the value of Restex's interest tax shield. % (Round to two decimal places.) Interest tax shield value is S million (Round to the nearest million)
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