Golden Eye Co., a hi-tech satellite company, has asked you to value the company for possible...

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Golden Eye Co., a hi-tech satellite company, has asked you to value the company for possible cross-listing in the U.S. The company has estimated revenues, earnings before interest and taxes, change in net working capital, and net capital expenditures (defined as Capex - depreciation) for the next three years (see Exhibit 1 below.) The free cash flow in year 4 is estimated to be $250 million and is expected to grow at 4% forever. The tax rate for similar firms is 36%. The average unlevered beta of comparable firms is 1.90. Golden Eye Co. has just borrowed $1 billion of long-term debt at 9% interest rate. It will repay $200 million per year in the first three years, and then will maintain the debt at $400 million forever. If the risk-free rate is 6% and the market risk premium is 5.5%, what is the market value of equity of Golden Eye Co.? (6 pts.) Exhibit 1: Year Revenues EBIT Net capex Change in WC T=1 6,619 540 150 70 T=2 7,417 680 170 75 T=3 8,564 750 190 80 Golden Eye Co., a hi-tech satellite company, has asked you to value the company for possible cross-listing in the U.S. The company has estimated revenues, earnings before interest and taxes, change in net working capital, and net capital expenditures (defined as Capex - depreciation) for the next three years (see Exhibit 1 below.) The free cash flow in year 4 is estimated to be $250 million and is expected to grow at 4% forever. The tax rate for similar firms is 36%. The average unlevered beta of comparable firms is 1.90. Golden Eye Co. has just borrowed $1 billion of long-term debt at 9% interest rate. It will repay $200 million per year in the first three years, and then will maintain the debt at $400 million forever. If the risk-free rate is 6% and the market risk premium is 5.5%, what is the market value of equity of Golden Eye Co.? (6 pts.) Exhibit 1: Year Revenues EBIT Net capex Change in WC T=1 6,619 540 150 70 T=2 7,417 680 170 75 T=3 8,564 750 190 80

Answer rating: 100% (QA)

ANSWER To calculate the market value of equity of Golden Eye Co we need to use the free cash flow to ... View the full answer