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Consider the table given below to answer the following question. Year 1 2 3 4 5 6 7 8 9 10 Asset value 8.00 9.20
Consider the table given below to answer the following question.
Year | ||||||||||||||||||||
1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | |||||||||||
Asset value | 8.00 | 9.20 | 10.58 | 12.17 | 13.63 | 15.26 | 17.09 | 18.63 | 20.31 | 22.14 | ||||||||||
Earnings | 1.20 | 1.38 | 1.59 | 1.83 | 2.04 | 2.21 | 2.39 | 2.52 | 2.23 | 2.44 | ||||||||||
Net investment | 1.20 | 1.38 | 1.59 | 1.46 | 1.64 | 1.83 | 1.54 | 1.68 | 1.83 | 1.99 | ||||||||||
Free cash flow (FCF) | 0.37 | 0.41 | 0.38 | 0.85 | 0.84 | 0.41 | 0.44 | |||||||||||||
Return on equity (ROE) | 0.15 | 0.15 | 0.15 | 0.15 | 0.15 | 0.145 | 0.14 | 0.135 | 0.11 | 0.11 | ||||||||||
Asset growth rate | 0.15 | 0.15 | 0.15 | 0.12 | 0.12 | 0.12 | 0.09 | 0.09 | 0.09 | 0.09 | ||||||||||
Earnings growth rate | 0.15 | 0.15 | 0.15 | 0.12 | 0.08 | 0.08 | 0.05 | 0.11 | 0.09 | |||||||||||
Assuming that competition drives down profitability (on existing assets as well as new investment) to 14.5% in year 6, 14% in year 7, 13.5% in year 8, and 11% in year 9 and all later years. What is the value of the concatenator business? Assume 12% cost of capital. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
Consider the table given below to answer the following question. 1 8.00 1.20 1.20 2 3 9.20 10.58 1.38 1.59 1.38 1.59 Asset value Earnings Net investment Free cash flow (FCF) Return on equity (ROE) Asset growth rate Earnings growth rate Year 4 5 6 12.17 13.63 15.26 1.83 2.04 2.21 1.46 1.64 1.83 0.37 0.41 0.38 0.15 0.15 0.145 0.12 0.12 0.12 0.15 0.12 0.08 7 17.09 2.39 1.54 0.85 0.14 0.09 0.08 8 9 10 18.63 20.31 22.14 2.52 2.23 2.44 1.68 1.83 1.99 0.84 0.41 0.44 0.135 0.11 0.11 0.09 0.09 0.09 0.05 -0.11 0.09 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 Assuming that competition drives down profitability (on existing assets as well as new investment) to 14.5% in ye 6, 14% in year 7, 13.5% in year 8, and 11% in year 9 and all later years. What is the value of the concatenator business? Assume 12% cost of capital. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Present value $ 7.99 million Consider the table given below to answer the following question. 1 8.00 1.20 1.20 2 3 9.20 10.58 1.38 1.59 1.38 1.59 Asset value Earnings Net investment Free cash flow (FCF) Return on equity (ROE) Asset growth rate Earnings growth rate Year 4 5 6 12.17 13.63 15.26 1.83 2.04 2.21 1.46 1.64 1.83 0.37 0.41 0.38 0.15 0.15 0.145 0.12 0.12 0.12 0.15 0.12 0.08 7 17.09 2.39 1.54 0.85 0.14 0.09 0.08 8 9 10 18.63 20.31 22.14 2.52 2.23 2.44 1.68 1.83 1.99 0.84 0.41 0.44 0.135 0.11 0.11 0.09 0.09 0.09 0.05 -0.11 0.09 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 Assuming that competition drives down profitability (on existing assets as well as new investment) to 14.5% in ye 6, 14% in year 7, 13.5% in year 8, and 11% in year 9 and all later years. What is the value of the concatenator business? Assume 12% cost of capital. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Present value $ 7.99 millionStep by Step Solution
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