Question
You have been called in by LaPlace Instruments, a manufacturer of medical equipment, to provide some advice on value creation. The firm has a market
You have been called in by LaPlace Instruments, a manufacturer of medical equipment, to provide some advice on value creation. The firm has a market value of $ 525 million and you believe that it is fairly priced. The firm reported an EBITDA of 150 million in the most recent financial year and paid 40% of its income as taxes. The firm also had capital expenditures of $ 75 million, depreciation of $ 25 million, and no working capital needs during the year. The firm has an expected growth rate of 4%. You believe that the firm can double its return on capital on new investments but cannot do much to improve its return on capital on existing investments. Estimate the value of the firm with this change, assuming that the stable growth rate remains 4%.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started