Now suppose that Firm C is projected to have $140 million in Noplat...

 

Now suppose that Firm C is projected to have $140 million in Noplat and interest expense of $20 million in 2029 (year T+1). It is forecast to have $520 million in debt in 2028 and 2029. Firm C has 90 million shares outstanding and this number will remain constant. The marginal corporate tax rate is 15%. The investment banker agrees that a reasonable range of PE (price-earnings) ratios for Firm C in 2028 and 2029 is between 20 and 25. The assumptions on the reinvestment rate and return on invested capital from Question 3(a) do not apply here. Do you think that under these assumptions the Firm-Value-to-Noplat multiple of 28 is reasonable for the continuation value? Why or why not? Please help with how the calculations and reasoning is

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To determine whether a FirmValuetoNoplat multiple of 28 is reasonable for the continuation value of ... View the full answer