Golden Eye Co., a hi-tech satellite company, has asked you to value the company for possible...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Golden Eye Co., a hi-tech satellite company, has asked you to value the company for possible cross-listing in the U.S. The company has estimated revenues, earnings before interest and taxes, change in net working capital, and net capital expenditures (defined as Capex - depreciation) for the next three years (see Exhibit 1 below.) The free cash flow in year 4 is estimated to be $250 million and is expected to grow at 4% forever. The tax rate for similar firms is 36%. The average unlevered beta of comparable firms is 1.90. Golden Eye Co. has just borrowed $1 billion of long-term debt at 9% interest rate. It will repay $200 million per year in the first three years, and then will maintain the debt at $400 million forever. If the risk-free rate is 6% and the market risk premium is 5.5%, what is the market value of equity of Golden Eye Co.? (6 pts.) Exhibit 1: Year Revenues EBIT Net capex Change in WC T=1 6,619 540 150 70 T=2 7,417 680 170 75 T=3 8,564 750 190 80 Golden Eye Co., a hi-tech satellite company, has asked you to value the company for possible cross-listing in the U.S. The company has estimated revenues, earnings before interest and taxes, change in net working capital, and net capital expenditures (defined as Capex - depreciation) for the next three years (see Exhibit 1 below.) The free cash flow in year 4 is estimated to be $250 million and is expected to grow at 4% forever. The tax rate for similar firms is 36%. The average unlevered beta of comparable firms is 1.90. Golden Eye Co. has just borrowed $1 billion of long-term debt at 9% interest rate. It will repay $200 million per year in the first three years, and then will maintain the debt at $400 million forever. If the risk-free rate is 6% and the market risk premium is 5.5%, what is the market value of equity of Golden Eye Co.? (6 pts.) Exhibit 1: Year Revenues EBIT Net capex Change in WC T=1 6,619 540 150 70 T=2 7,417 680 170 75 T=3 8,564 750 190 80
Expert Answer:
Answer rating: 100% (QA)
ANSWER To calculate the market value of equity of Golden Eye Co we need to use the free cash flow to ... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-0077522940
15th edition
Authors: Ray Garrison, Eric Noreen, Peter Brewer
Posted Date:
Students also viewed these finance questions
-
Case Swimmers Headphones1 Finally! Its the end of 2019 and you are sitting at your new desk in a plush office in north Bogota, with a delicious cup of Colombian coffee. You think about all it took to...
-
Flowmaster Forge Inc. is a designer and manufacturer of industrial air-handling equipment that is a wholly owned subsidiary of Howden Industrial Inc. Howden is interested in selling Flowmaster to an...
-
BACKGROUND You are an information analyst working for NEE. The company president has asked you to prepare a Quantitative analysis of financial, sales, and operations data to help determine which...
-
Write a paper on the brothers karamazov, fyodor dostoyevsky creates a conversation between two brothers: the cynical ivan, and the devoutly religious and earnest alyosha. In their dialogues...
-
Liquid water at 180oC, 2000 kPa is throttled into a flash evaporator chamber having a pressure of 500 kPa. Ignore any change in the kinetic energy. What is the fraction of liquid and vapor in the...
-
Give two sets of five numbers that have the same mean but different standard deviations, and give two sets of five numbers that have the same standard deviation but different means.
-
The chapter lists a number of features of the U.S. economy that the FASB says shape the accounting system. Indicate whether it is true or false that the following items are among those that shape the...
-
Jarriot, Inc., presented two years of data for its Furniture Division and its Houseware Division. Furniture Division: Houseware Division: Required: 1. Compute the ROI and the margin and turnover...
-
Find the coordinates of the circumcenter of AABC with vertices A(-4,0), B(8,3), and C(4,3). (6.-14.5) (0,1.5) O (2,1.5) (6,1.1)
-
At age 25, someone sets up an IRA (individual retirement account) with an APR of 5%. At the end of each month he deposits $60 in the account. How much will the IRA contain when he retires at age 65?...
-
Option #2 Perceptual Set In your own words, explain what the term "perceptual set" means and explain why it is important. How does culture affect our perceptual set? Can you give an example?
-
Cyber Security Indicate where this career path fits into the larger field of computing. Refer to industry standards, professional organizations, and accrediting agencies for the status of the career...
-
Medical Law and Ethics and Administrative Medical Assisting topics including reception, correspondence, mail, telephone techniques, and office supplies. Medical law and ethics. Define the two terms...
-
a.CT Sdn Bhd manufactures and sells laptop computers and uses standard costing.For the month of September there was no beginning inventory, there were 3,000 units produced and 2,500 units sold.The...
-
1 Find the derivative of the following 1. f(x) = 12x- 6x+2 28 +4x3/4
-
13.Felicia and Rocky met at a training convention and subsequently became lovers. They had children named Enrico and Euriz. One night while on his way home, Rocky met his end when his car collided...
-
Use the following information for questions 104 and 105. Atrial balance before adjustments included the following: 79. SalesSales returns and allowance Accounts receivable Allowance fordoubtful acc 2...
-
Difference between truncate & delete
-
Refer to the data for Beech Corporation in Exercise 812. The company is considering making the following changes to the assumptions underlying its master budget: In Exercise 812 Beech Corporation is...
-
Toxaway Company is a merchandiser that segments its business into two divisionsCommercial and Residential. The companys accounting intern was asked to prepare segmented income statements that the...
-
The Hard Rock Mining Company is developing cost formulas for management planning and decision-making purposes. The companys cost analyst has concluded that utilities cost is a mixed cost, and he is...
-
Mr Norman set up a new business on 1 January 20X8. He invested 50,000 in the new business on that date.The following information is available. 1 Gross profit was 20% of sales. Monthly sales were as...
-
The annual financial statements of companies are used by various parties for a wide variety of purposes. For each of the seven different user groups, explain their presumed interest with reference to...
-
Information contained in a profit and loss account and a balance sheet prepared under accrual accounting concepts is factual and objective. Discuss.
Study smarter with the SolutionInn App