Answered step by step
Verified Expert Solution
Question
1 Approved Answer
4) You have been asked to value Revox Inc., a cement company. The company reported $ 5 million in after-tax operating income on revenues of
4) | You have been asked to value Revox Inc., a cement company. The company | |||||||
reported $ 5 million in after-tax operating income on revenues of $ 100 million in | ||||||||
the most recent year. It expects revenues to grow 20% next year as the economy | ||||||||
comes out of the recession and the after-tax operating margin to improve to 10%. | ||||||||
The firm expects capital expenditures of $ 10 million and depreciation of $ 4 | ||||||||
million next year; there are no working capital requirements. After next year, the | ||||||||
expected growth in operating income is 4% forever and the firm expects to | ||||||||
maintain a return on invested capital of 12% in perpetuity. If the cost of capital is | ||||||||
10%, estimate the value of Revox Inc. today. (3 points) |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started