Courtney is valuing a new division and has identified a comparable firm which has  an expected return on equity of 10%, an expected return on debt of 4%, and a  D/E ratio of 0.3. What is the asset cost of capital for the new division? (Using the information from the previous question) The division is expected to  have a FCF of $6M one year from today. The yearly cashflows will increase by  3% per year, forever. Courtney intends on keeping a constant D/E ratio of 1.0 for  the division. If the division's debt yield is 4.5% and the corporate tax rate is 40%,  What is the PV of the division's FCFs?

Answer rating: 100% (QA)

To calculate the asset cost of capital for the new division we can use the following formula Asset C... View the full answer