Question
ABC is a mature company with no real growth expectation. Its estimated annual revenue for X1 is 100, its EBITDA margin is 60%, and the
ABC is a mature company with no real growth expectation. Its estimated annual revenue for X1 is 100, its EBITDA margin is 60%, and the tax rate on profit the company has been paying is 34%, which the ratio (Working Capital Need / Net Revenue Need) is 10%. Additionally its debt is 100 and its actual Kd (cost of capital of others) is 10%. Your actual Ke (Cost of Capital employed) is 15%. Assuming CAPEX equals depreciation at maturity, calculate E0 (Equiy value at date 0) and V0 (Company Value at date zero) using the Free Cash Flow to Firm (FCFF) and Free Cash Flow to Equity ( FCFE).
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