Company A is a large provider of cement and related products. This year it reported earnings before interest and taxes (EBIT) of -$500 million (loss of 500m) on revenues of $8 billion. The firm expects its operating margin (before tax operating margin) to improve next year to the industry average of 6%. The average cost of capital for the industry is 10%, the average return on capital for the industry is 12,5% and the industry is mature, with all firms in it expecting to report growth of 5% in revenues over the long term. The tax rate currently is 40%.

a) Estimate the value of Companny A as a firm. (You may assume Company A will have the same cost of capital and return on capital as the rest of the industry)

b) If Company A has $756 million in net operating losses to carry forward after the current year, how will that affect the firm valuation from part a?