The following is a four-year forecast for Torino Marine. Year 2022 2023 2024 2025 Free cash flow ($ millions) −60 81 98 120 Estimate the fair market value of Torino Marine at the end of 2021. Assume that after 2025, earnings before interest and tax will remain constant at $200 million, depreciation will equal capital expenditures in each year, and working capital will not change. Torino Marine’s weighted-average cost of capital is 13 percent and its tax rate is 20 percent. Note: Do not round intermediate calculations. Enter your answer in
The following is a four-year forecast for Torino Marine. Year 2022 2023 2024 2025 Free cash flow ($ millions) −60 81 98 120 Estimate the fair market value of Torino Marine at the end of 2021. Assume that after 2025, earnings before interest and tax will remain constant at $200 million, depreciation will equal capital expenditures in each year, and working capital will not change. Torino Marine’s weighted-average cost of capital is 13 percent and its tax rate is 20 percent. Note: Do not round intermediate calculations. Enter your answer in
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The following is a four-year
| Year | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| −60 | 81 | 98 | 120 |
- Estimate the fair market value of Torino Marine at the end of 2021. Assume that after 2025, earnings before interest and tax will remain constant at $200 million,
depreciation will equal capital expenditures in each year, andworking capital will not change. Torino Marine’s weighted-average cost of capital is 13 percent and its tax rate is 20 percent.Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.
- Estimate the fair market value per share of Torino Marine’s equity at the end of 2021 if the company has 45 million shares outstanding and the market value of its interest-bearing liabilities on the valuation date equals $350 million.
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
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