Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You need to estimate the value of Laputa Aviation. You have the following forecasts ( in millions of dollars ) of its profits and of

You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital:
Year
1234
Earnings before interest, taxes, depreciation, and amortization (EBITDA) $ 83 $ 103 $ 118 $ 123
Depreciation 23333843
Pretax profit 60708080
Tax at 30%18212424
Investment 12151820
From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 60% by equity and 40% by debt. Its cost of equity is 14%, its debt yields 10%, and it pays corporate tax at 30%.
Estimate the companys total value.
Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount.
What is the value of Laputas equity?
Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Finance Applications and Theory

Authors: Marcia Cornett, Troy Adair

3rd edition

1259252221, 007786168X, 9781259252228, 978-0077861681

More Books

Students also viewed these Finance questions