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: Year 1 2 3 4 Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation $ 80 $ 100 $ 115 $ 120 20 30 35 40 Pretax profit 60 70 80 80 Tax at 30% 18 21 24 24 Investment 12 15 18 20 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year 4 levels. Laputa is finan 50% by equity and 50% by debt. Its cost of equity is 15%, its debt yields 7%, and it pays corporate tax at 30%. a. Estimate the company's total value. Note: Do not round intermediate calculations. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations.

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: Year 1 2 3 4 Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation $ 80 $ 100 $ 115 $ 120 20 30 35 40 Pretax profit 60 70 80 80 Tax at 30% 18 21 24 24 Investment 12 15 18 20 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year 4 levels. Laputa is finan 50% by equity and 50% by debt. Its cost of equity is 15%, its debt yields 7%, and it pays corporate tax at 30%. a. Estimate the company's total value. Note: Do not round intermediate calculations. b. What is the value of Laputa's equity? Note: Do not round intermediate calculations.

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.15E

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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 1 $ 84 BHR2 a. Total value b. Laputa's equity 14 70 21 13 Year 2 $ 104 24 80 24 16 3 $ 119 29 90 27 19 4 73872 $ 124 34 90 21 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 15%, its debt yields 6%, and it pays corporate tax at 30%. 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.
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 1 $85 25 60 a. Total value i b. Laputa's equity 18 14 Year 2 $ 105 35 70 21 17 3 $ 120 40 se 24 20 4 $ 125 45 80 24 22 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 16%, its debt yields 7%, and it pays corporate tax at 30%. 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.
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: Year 1 2 3 4 Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation $ 90 $ 110 $ 125 $ 130 10 20 25 30 Pretax profit 80 90 100 100 Tax at 30% 24 27 30 30 19 22 25 27 Investment From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 12%, its debt yields 7%, and it pays corporate tax at 30%. 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. × Answer is complete but not entirely correct. a. Total…
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: Year 1 2 3 4 Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation $ 90 $ 110 $ 125 $ 130 10 20 25 30 Pretax profit 80 90 100 100 Tax at 30% Investment 24 27 30 30 19 22 25 27 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 12%, its debt yields 7%, and it pays corporate tax at 30%. 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. Answer is complete but not entirely correct. a. Total value…
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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: Year 1 2 3 4 Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation $ 90 $ 110 $ 125 $ 130 10 20 25 30 Pretax profit 80 90 100 100 Tax at 30% Investment 24 27 30 30 19 22 25 27 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 12%, its debt yields 7%, and it pays corporate tax at 30%. 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. Answer is complete but not entirely correct. a. Total value…
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, amortion (EBITDA) Depreciation Pretax profit Tax at 30% Investment $ 78 38 40 12 14 Year a. Total value b. Laputa's equity 2 $98 48 50 15 17 $ 113 53 60 18 20 $118 58 60 18 22 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year 4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 13%, its debt yields 9%, and it pays corporate tax at 30% 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.
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 40% Investment Total value million Laputa's equity $ Ask Jasper 1 DEBEH million 90 10 80 32 19 $ 2 129 3 N Year 110 20 90 36 22 $ 3 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 12%, its debt yields 7%, and it pays corporate tax at 40%. 125 25 100 40 25 a. Estimate the company's total value. (Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount.) $ 4 130 30 100 40 27 b. What is the value of Laputa's equity? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
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