You are running a major tech company, Technology Innovation Inc. TIC and are thinking about investing in electric vehicles EV through a new solely owned startup TIC The new endeavor requires an initial investment of $ billion year and yields a perpetual pretax earnings of $ billion per year, starting the following year year TICs tax rate is

TIC is currently all equity financed and can issue new equity to finance the initial investment of TIC It can also raise new capital through TIC to fund the investment. There is a listed company, eCar, which is in the EV business. You have the following data:

TIC

eCar

Assume that CAPM is valid, the riskfree interest rate is the risk premium on the market portfolio is and eCar keeps its debttovalue ratio constant.

For parts AC suppose you finance the initial investment by issuing equity through TIC

What is the aftertax cash flow of TIC each year?

  

Answer rating: 100% (QA)

Answer Heres the aftertax cash flow of TIC 2 each year Afterta... View the full answer