You are asked to value a company and have the following forecast (in million dollars) of its future profits and future investments in new plant and working capital.

Year
	1	2	3	4
Depreciation expenses	20	30	35	40
Profit after tax (tax: 40%)	36	42	48	48
Investment in plants   and working capital	12	15	18	20

 

From year 5 onwards, depreciation and investment in plants and working capital are expected to remain unchanged at year-4 levels. The Shard is financed 50% by debt and 50% by equity. Its cost of equity is 15% and its debt yields is 7%. The company pays corporate income tax at 40%.

i.      Estimate the company’s overall value. (Hint: note that operating cash flows can be obtained by adding depreciation to profit after tax).

ii.     What is the value of the company’s equity?