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) $ 86 $ 106 $ 121 $ 126
Depreciation 26364146
Pretax profit 60708080
Tax at 30%18212424
Investment 15182123
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 17%, its debt yields 8%, 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_2

Step: 3

blur-text-image_3

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

Essentials Of Investments

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

6th Edition

0073226386, 978-0073226385

More Books

Students also viewed these Finance questions

Question

Do you strive to create a diverse workforce?

Answered: 1 week ago