Question

Restex has a​ debt-equity ratio of 0.56​, an equity cost of capital of 18%​, and a debt cost of capital of 14%. ​Restex's corporate tax rate is 21%​, and its market capitalization is $272 million.

a. If​ Restex's free cash flow is expected to be $3 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 $3 million in one​ year, the expected future growth rate is...............%. (Round to two decimal​ places.)

b. Estimate the value of​ Restex's interest tax shield.

Interest tax shield value is ​$............million. ​ (Round to the nearest​ million.)

Answer 1