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

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) $ 89 $ 109 $ 124 $ 129 Depreciation 29 39 44 49 Pretax profit 60 70 80 80 Tax at 30% 18 21 24 24 Investment 18 21 24 26 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 20%, its debt yields 6%, 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

Stocks Bonds And The Investment Horizon

Authors: Haim Levy

1st Edition

9811250146, 978-9811250149

More Books

Students also viewed these Finance questions

Question

4. Label problematic uses of language and their remedies

Answered: 1 week ago