Schauffele is considering an acquisition of Varner, Inc., a privately-held firm that manufactures healthcare diagnostic equipment. Assume that the correct WACC to value the cash flows is 12.15%.

Varner just reported EBIT of $5,600,000. The CFO of Schauffele projects that Varner should see profits grow at 12% per year for the next two years, 8% per year for the following two years, and then 5% per year thereafter. The annual change in Net Working Capital Investment should be 4% of EBIT, while Capital Expenditures should be 8% of EBIT. Depreciation charges should be 5% of EBIT; the appropriate Tax Rate is 21%.

Rounded to the nearest dollar, calculate the value that the CFO of Schauffele places on Varner, Inc.

Group of answer choices

$62,868,529

$70,412,752

$83,258,609

$64,479,849

None of the above

Answer rating: 100% (QA)

Okay lets calculate the value of Varner using the given information Year 0 EBIT ... View the full answer