Consider the table given below to answer the following question. Year 1 2 3 4 5 6
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Question:
Consider the table given below to answer the following question.
Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
---|---|---|---|---|---|---|---|---|---|---|
Asset value | 10.00 | 11.20 | 12.54 | 14.05 | 15.31 | 16.69 | 18.19 | 19.29 | 20.44 | 21.67 |
Earnings | 1.20 | 1.34 | 1.51 | 1.69 | 1.84 | 2.00 | 2.18 | 2.31 | 2.45 | 2.60 |
Net investment | 1.20 | 1.34 | 1.51 | 1.26 | 1.38 | 1.50 | 1.09 | 1.16 | 1.23 | 1.30 |
Free cash flow | 0.00 | 0.00 | 0.00 | 0.42 | 0.46 | 0.50 | 1.09 | 1.16 | 1.23 | 1.30 |
Return on equity | 0.12 | 0.12 | 0.12 | 0.12 | 0.12 | 0.12 | 0.12 | 0.12 | 0.12 | 0.12 |
Asset growth rate | 0.12 | 0.12 | 0.12 | 0.09 | 0.09 | 0.09 | 0.06 | 0.06 | 0.06 | 0.06 |
Earnings growth rate | 0.12 | 0.12 | 0.12 | 0.09 | 0.09 | 0.09 | 0.06 | 0.06 | 0.06 |
Assuming that competition drives down profitability (on existing assets as well as new investment) to 11.5% in year 6, 11% in year 7, 10.5% in year 8, and 8% in year 9 and all later years. What is the value of the concatenator business? Assume 10% cost of capital.
Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.
Related Book For
Understanding Basic Statistics
ISBN: 9781111827021
6th Edition
Authors: Charles Henry Brase, Corrinne Pellillo Brase
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