Question
Icarus airlines is proposing to go public and you have been given the task of estimating the value of it's equity. management plans to maintain
Icarus airlines is proposing to go public and you have been given the task of estimating the value of it's equity. management plans to maintain debt at 30% of the companys present value and you believe that at this capital structure the companys debtholders will demand a return of 6% and stockholders will require 11%. the company is forecasting that next years operating cash flow (depreciation plus profit after tax at 21%) will be $68 million and that investment in plant and net working capital will be $39 million. thereafter operating cash flow and investment expenditures are forecast to grow in perpetuity by 4% a year. what is the total value of Icarus? what is the value of the companys equity?
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