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- Presently, the firm generates after - tax operating earnings of 3 0 0 million from revenues of 1 0 billion, with a capital turnover

- Presently, the firm generates after-tax operating earnings of 300 million from revenues of 10 billion, with a capital turnover ratio of 2.5.
- It is anticipated that 60% of the after-tax operating income will be reinvested.
- The company is entirely financed through equity and maintains a cost of capital of 10%.
To estimate the firm's value, assuming ongoing adherence to existing policies indefinitely, we calculate the present value based on constant returns on capital and reinvestment rates.
Assuming a potential increase in after-tax operating margins from 3% to 5%, while keeping the capital turnover ratio constant, and reducing the reinvestment rate to 40%, alongside a shift to the optimal debt ratio which would lower the cost of capital to 9%, we can assess the potential increase in the firm's value.
By implementing these changes, the firm's value would likely experience a significant boost.
Estimate the change in value.

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