Restex maintains a debt-equity ratio of 0.85, and has an equity cost of capital of 12% and

Question:

Restex maintains a debt-equity ratio of 0.85, and has an equity of 12% and a debt of 7%. Restex’s corporate tax rate is 40%, and its market capitalization is $220 million.
a. If Restex’s is expected to be $10 million in one year, what constant expected future growth rate is consistent with the firm’s current market value?
b. Estimate the value of Restex’s interest tax shield.

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Free Cash Flow
Free cash flow (FCF) represents the cash a company generates after accounting for cash outflows to support operations and maintain its capital assets. Unlike earnings or net income, free cash flow is a measure of profitability that excludes the...