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You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation 1 $ 82 12 70 Year 21 11 2 $ 102 22 80 3 $ 117 27 Pretax profit Tax at 30% Investment From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financ 24 14 4 $ 122 32 90 27 19 90 27 17

You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation 1 $ 82 12 70 Year 21 11 2 $ 102 22 80 3 $ 117 27 Pretax profit Tax at 30% Investment From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financ 24 14 4 $ 122 32 90 27 19 90 27 17

Essentials Of Investments
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
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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: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment X Answer is complete but not entirely correct. a. Total value b. Laputa's equity 1 $ 82 12 70 21 11 $ $ Year 752 376 x 2 $ 102 22 80 24 14 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 50% by equity and 50% by debt. Its cost of equity is 13%, its debt yields 9%, and it pays corporate tax at 30%. 3 $ 117 27 90 27 17 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. 4 $ 122 32 90 27 19
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: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment X Answer is complete but not entirely correct. a. Total value b. Laputa's equity 1 $ 82 12 70 21 11 $ $ Year 752 376 x 2 $ 102 22 80 24 14 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 50% by equity and 50% by debt. Its cost of equity is 13%, its debt yields 9%, and it pays corporate tax at 30%. 3 $ 117 27 90 27 17 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. 4 $ 122 32 90 27 19
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