You have been asked to value the Industries, a sports equipment manufacturer and have come up with the following inputs. Base Year Information (2016) · Earnings before interest and taxes in 20X0 =$600 million · Capital expenditures in 20X0 = $120 million · Depreciation in 20X0 = $100 million · Revenues in 20X0 = $6,000 million · Working capital as percent of revenues = 20% · Tax rate = 40% High-Growth Phase · Length of high-growth phase = 5 years · Expected growth rate in FCFF=15% · Beta = 1.30 · Cost of debt = 8% (pre-tax) · Debt ratio = 30% · Risk-free rate = 7% · Market Risk Premium (MRP) = 6% Stable-Growth Phase · Expected growth rate in FCFF= 3% · Beta = 1.5 · Cost of debt =7% (pre-tax) · Debt ratio = 25% · Risk-free rate = 7% · Market Risk Premium (MRP) = 6% Required: Estimate the Terminal Value of North Island Industries.
You have been asked to value the Industries, a sports equipment manufacturer and have come up with the following inputs.
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Base Year Information (2016) · Earnings before interest and taxes in 20X0 =$600 million · Capital expenditures in 20X0 = $120 million · · Revenues in 20X0 = $6,000 million · Working capital as percent of revenues = 20% · Tax rate = 40% |
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High-Growth Phase · Length of high-growth phase = 5 years · Expected growth rate in FCFF=15% · Beta = 1.30 · Cost of debt = 8% (pre-tax) · Debt ratio = 30% · Risk-free rate = 7% · Market Risk Premium (MRP) = 6% |
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Stable-Growth Phase · Expected growth rate in FCFF= 3% · Beta = 1.5 · Cost of debt =7% (pre-tax) · Debt ratio = 25% · Risk-free rate = 7% · Market Risk Premium (MRP) = 6% |
Required:
- Estimate the Terminal Value of North Island Industries.
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