Suppose Goodyear Tire and Rubber Company is considering divesting one of its manufacturing plants. The plant is

expected to generate free cash flows of $1.64million per year, growing at a rate of 2.6 %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 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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