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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
You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its f investments in new plant and working capital: Year 1 2 3 4 Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation $ 90 $ 110 $ 125 $ 130 10 20 25 30 Pretax profit 80 90 100 100 Tax at 30% 24 27 30 30 Investment 19 22 25 27 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is finance 40% by equity and 60% by debt. Its cost of equity is 12%, its debt yields 7%, and it pays corporate tax at 30%. a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. a. Total value b. Laputa's equity
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