You are valuing TempTech, a young start up. The company generated $500 million in revenues in the most recent year and you have estimated the following for the company: 1 2 $ 1,000 $2,000 Revenues (in millions) Operating margin Sales/Capital ratio Cost of Capital Last year $500 2.00 -10% 2.00 15% -5% 2.00 12% 3 $3,000 (a) Estimate the free cash flow to the firm each year for the next 3 years (b) Estimate the present value of each of the cash flows for the next 3 years 10% 2.00 10% The company has a net operating loss of $50 million that it is carrying forward and faces a 40% tax rate, once it starts making taxable income.
You are valuing TempTech, a young start up. The company generated $500 million in revenues in the most recent year and you have estimated the following for the company: 1 2 $ 1,000 $2,000 Revenues (in millions) Operating margin Sales/Capital ratio Cost of Capital Last year $500 2.00 -10% 2.00 15% -5% 2.00 12% 3 $3,000 (a) Estimate the free cash flow to the firm each year for the next 3 years (b) Estimate the present value of each of the cash flows for the next 3 years 10% 2.00 10% The company has a net operating loss of $50 million that it is carrying forward and faces a 40% tax rate, once it starts making taxable income.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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You are valuing TempTech, a young start up. The company generated $500 million in revenues in the most recent year and you have estimated the following for the company: 1 2 $ 1,000 $2,000 Revenues (in millions) Operating margin Sales/Capital ratio Cost of Capital Last year $500 2.00 -10% 2.00 15% -5% 2.00 12% 3 $3,000 (a) Estimate the free cash flow to the firm each year for the next 3 years (b) Estimate the present value of each of the cash flows for the next 3 years 10% 2.00 10% The company has a net operating loss of $50 million that it is carrying forward and faces a 40% tax rate, once it starts making taxable income.
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