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I have gotten both of these wrong twice now. Can someone help? You need to estimate the value of Laputa Aviation. You have the following
I have gotten both of these wrong twice now. Can someone help?
You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Year 1 2 3 $ 101 $ 116 $ 31 4 $ 121 S Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 40% Investment 41 80 32 13 16 18 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 12%, its debt yields 8%, and it pays corporate tax at 40%. a. Estimate the company's total value. (Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount.) Total value million b. What is the value of Laputa's equity? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Laputa's equity millionStep by Step Solution
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