Question
You are going to value Lauryn's Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta
You are going to value Lauryn's Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.7, a debt-to-equity ratio of .5, and a tax rate of 21 percent. Assume a risk-free rate of 6 percent and a market risk premium of 12 percent. Lauryn's Doll Co. had EBIT last year of $57 million, which is net of a depreciation expense of $5.7 million. In addition, Lauryn's made $4.3 million in capital expenditures and increased net working capital by $2.6 million. Assume the FCF is expected to grow at a rate of 2 percent into perpetuity. What is the value of the firm?
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