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You are valuing Research AI, a materials discovery firm. The value of the operating assets based on your analysis is $1,450 million. This estimated
You are valuing Research AI, a materials discovery firm. The value of the operating assets based on your analysis is $1,450 million. This estimated value is based on your assumptions: > > > The firm is in stable growth, growing at 2.5% a year Its cost of capital is 10% Its return on capital is 24% You derived the return on capital and reinvestment rate based on the firm's financial statements and used those to get your estimate of the firm's growth rate. You realize that you did not capitalize R&D. You expect that capitalizing R&D will double the reinvestment rate and that the return on capital will drop to 16%. Assuming Research AI is in stable growth, compute the impact of capitalizing R&D on the value of Research Al's operating assets.
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