The Kentucky Headhunter Bourbon Company has an operating income (EBIT) of $3,000 with a marginal tax rate of 35%. The net CAPEX was $200 with a $150 change in working capital. Over the next 5 years, they anticipate an average reinvestment rate of 25% with a return on capital of 15%. During this high-growth period, they estimate a beta of 0.95, a risk-free rate of 1.5% and risk premium of 5%. Pre-tax debt cost is 6.0%, with a 40% debt ratio. After year 5, the estimated beta will be 1.10, with the same risk-free rate and market risk premium as in the high-growth period.

The stable pre-tax debt cost will be 4.5%, the tax rate will remain at 35% and the stable growth rate will be 1.0%. The schedule for Net CAPEX over the 5-year high-growth period is: $225, $250, $260, $275, $300.

The schedule for Change in Net Working Capital will be: $175, $225, $250, $260, $270. For the stable period, the FCFF can be estimated using the after-tax EBIT less projected reinvestment. Based on this information, what is the projected enterprise value for the company?

Answer rating: 100% (QA)

ANS WER The first step is to calculate the FC FF for the high growth period The F... View the full answer