You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Year 1 2 3 4 Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation $ 73 $ 93 33 43 Pretax profit 40 50 Tax at 30% 12 15 Investment 19 22 33052 $ 108 $ 113 48 53 60 60 18 18 25 27 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 60% by equity and 40% by debt. Its cost of equity is 18%, its debt yields 9%, and it pays corporate tax at 30%. a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. a. Total value b. Laputa's equity You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future investments in new plant and working capital: Year 1 2 3 4 Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation $ 73 $ 93 33 43 Pretax profit 40 50 Tax at 30% 12 15 Investment 19 22 33052 $ 108 $ 113 48 53 60 60 18 18 25 27 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 60% by equity and 40% by debt. Its cost of equity is 18%, its debt yields 9%, and it pays corporate tax at 30%. a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. a. Total value b. Laputa's equity
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
Solve for y' y' = y = 71-x 3
-
A process consists of two stirred tanks with Input q and outputs T1 and T2 (see figure). To test the hypothesis that the dynamics in each tank are basically first order, a step change in q is made...
-
What is one way to check for an error caused by transposed numbers?
-
Accrual- and Cash-Basis Expense Recognition} The following information is taken from the accrual accounting records of Kroger Sales Company: a. During January, Kroger paid \(\$ 9,150\) for supplies...
-
Jason Trevor owns a commercial bakery in Blakely, Georgia, that produces a variety of goods sold in grocery stores. Trevor is required by law to perform internal tests on food produced at his plant...
-
9. [-/5 Points] DETAILS SMITHNM13 2.4.030. MY NOTES ASK YOUR TEACHER PRACTICE ANOTHER Show that the following sets have the same cardinality, by placing the elements into a one-to-one correspondence....
-
I have the questions and answers attached in a word document. I need help calculating in excel.
-
You are the auditor of a mail order company which sells clothes on an approval basis through a large number of customers spread across the country. Customers are given 30 days to pay for goods after...
-
Identify and quantify the costs that are relevant to a particular decision.
-
A city government has a nine-year capital lease for property being used within the General Fund. The lease was signed on January 1, 2010. Minimum lease payments total \($90,000\) starting at the end...
-
Would you rather be in business as a sole trader, in a partnership, or in a company? Why?
-
Define and distinguish between relevant costs, outlay costs and opportunity costs.
-
x P(x) 0 0.15 1 0.3 2 0.15 3 0.4 Find the mean of this probability distribution. Round your answer to one decimal place.
-
How has the too-big-to-fail policy been limited in the FDICIA legislation? How might limiting the too-big-to-fail policy help reduce the risk of a future banking crisis?
-
A 40 in plasma television uses about \(175 \mathrm{~W}\). How many kilowatt-hours are needed to run the television in a month if the television is on for an average of 3 hours a day?
-
Which of the following is true regarding the accounting cycle? a. The accounts are adjusted after preparing the financial statements. b. Journal entries are made prior to the transaction being...
-
How many pills would be needed for a patient who has been prescribed \(25.5 \mathrm{mg}\) of a drug if each pill contains \(4.25 \mathrm{mg}\).
Study smarter with the SolutionInn App