Question
The following is a four-year forecast for Torino Marine. Year 2022 2023 2024 2025 Free cash flow ($ millions) 46 67 84 106 1.Estimate the
The following is a four-year forecast for Torino Marine. Year 2022 2023 2024 2025 Free cash flow ($ millions) 46 67 84 106
1.Estimate the fair market value of Torino Marine at the end of 2021. Assume that after 2025, earnings before interest and tax will remain constant at $200 million, depreciation will equal capital expenditures in each year, and working capital will not change. Torino Marines weighted-average cost of capital is 10 percent and its tax rate is 30 percent.
2.Estimate the fair market value per share of Torino Marines equity at the end of 2021 if the company has 31 million shares outstanding and the market value of its interest-bearing liabilities on the valuation date equals $210 million.
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