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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
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 1 2 3 4 Earnings before interest, taxes, depreciation, and amortization (EBITDA) $ 79 $ 99 $ 114 $ 119 Depreciation 29 39 44 49 Pretax profit 50 60 70 70 Tax at 40% 20 24 28 28 Investment 13 16 19 21 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 12%, its debt yields 8%, and it pays corporate tax at 40%. a. Estimate the companys total value. (Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount.) b. What is the value of Laputas equity? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
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