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 its future

image text in transcribed
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 $ 124 Earningo before Interest, taxes, depreciation, and Amortization (EBITDA) Depreciation Pretax profit Tax at 40 Investment 14 70 20 13 $ 104 24 30 32 16 119 29 90 36 19 90 36 21 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year 4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 15%, its debt ylelds 6%, and it pays corporate tax at 40%. a. Estimate the company's total value. (Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount.) Total value million b. What is the value of Leputa's equity? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Laputa's equity million

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

Fundamentals Of Financial Management

Authors: James C Van Horne

3rd Edition

0133393410, 978-0133393415

More Books

Students also viewed these Finance questions

Question

3. Understand the characteristics of a good hypothesis.

Answered: 1 week ago