Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Assume that today is December 31, 2022, and the following information applies to Xavier
Airlines:
-After-tax operating income [EBIT (1 - T)] for the just ended year is $900 million.
-The
-The capital expenditure for the just ended year was $225 million.
-There was no change in net operating working capital from the previous year.
-Analysts estimate that Xavier’s
8% per year for the next 5 years after which growth is expected to moderate to 4% at a
constant rate.
-The weighted average cost of capital (WACC) for Xavier is 10%.
-The market value of the company's debt is $2.875 billion.
-Xavier has 300 million shares of stock are outstanding.
Using the corporate valuation model approach, what should be:
a. The value of Xavier Airlines today (the firm)?
b. The value of Xavier Airlines’ Common Equity?
c. The intrinsic value of Xavier’s stock price today?
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