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Ting Lu is doing a valuation of the Mako Corporation. Mako has a 10% weighted average cost of capital and a 30% income tax rate.
Ting Lu is doing a valuation of the Mako Corporation. Mako has a 10% weighted average cost of capital and a 30% income tax rate. Ting has forecasted the information in the table below to compute Makos free cash flow to the firm. Ting assumes that the FCFF that he estimates for year 4 will grow at 3% forever.
Year | 1 | 2 | 3 | 4 |
EBIT | 100 | 120 | 140 | 150 |
Depreciation | 5 | 6 | 7 | 7.5 |
Capital expenditures | 20 | 23 | 27 | 15 |
NWC investment | 3 | 4 | 5 | 3 |
Based on this information, what is the intrinsic value of the Mako Corporation?
A. | $1,401 | |
B. | $1,168 | |
C. | $1,522 | |
D. | $1,435 |
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