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 $ 87 17 70 21 16 a. Total value b. Laputa's equity Year $ 107 27 80 24 19 3 $ 122 32 90 27 22 $127 37 90 27 24 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 18%, 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. A

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 $ 87 17 70 21 16 a. Total value b. Laputa's equity Year $ 107 27 80 24 19 3 $ 122 32 90 27 22 $127 37 90 27 24 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 18%, 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. A

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

See similar textbooks

Similar questions

Spellbound Solutions estimated future capital investment needs aré $ 1200m, and the estimated future net income is $1200m. If the company finances itself with 40 percent debt and 60 percent equity, how much in dividends can the company afford to pay? a. $0m b. $420m c. $480m d. $720m e. $900
The following information is available for a potential investment for Panda Company:
You are considering an investment in Fields and Struthers, Inc., and want to evaluate the firm's free cash flow. From the income statement, you see that Fields and Struthers earned an EBIT of $64 million, had a tax rate of 21 percent, and its depreciation expense was $5 million. Fields and Struthers's NOPAT gross fixed assets increased by $30 million from 2020 and 2021. The firm's current assets increased by $26 million and spontaneous current liabilities increased by $15 million. Calculate Fields and Struthers's NOPAT operating cash flow for 2021. (Enter your answer in millions of dollars rounded to 2 decimal places.) Operating cash flow Calculate Fields and Struthers's NOPAT investment in operating capital for 2021. (Enter your answer in millions of dollars.) Investment in operating capital million Free cash flow Check my work million million Calculate Fields and Struthers's NOPAT free cash flow for 2021. (Enter your answer in millions of dollars rounded to 2 decimal places.)
Use the information below to calculate WACC given the Market Capitalization of the company: Market Cap = 193.2 Million EBIT = 17.2 Million Depreciation = 4.2 Million Capital Expenditures = - 3.8 Million Change in W/C = 2.1 Million growth = 7% FCF = ? WACC = ?
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 Answer is complete but not entirely correct. 1 $ 74 24 a. Total value i b. Laputa's equity 50 15 18 326 652 € Year 2 $94 $ 189 34 60 18 21 39 70 21 24 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 17%, its debt yields 8 %, and it pays corporate tax at 30%. 4 $ 114 44 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…
1. Determine the Payback period using after-tax cash flows: 2. Determine the Net present value using after-tax cash flows (use 3 decimal places for the PV factor)
Oriole Company is considering an investment that will return a lump sum of $820,000, 6 years from now. Click here to view the factor table 1. Table 2 Table 3 Table 4 What amount should Oriole Company pay for this investment to earn an 7% return? (For calculation purposes, use 5 decim displayed in the factor table provided, e.g. 5.24571. Round answer to 2 decimal places, e.g. 25.25.) Oriole Company should pay 4 $
1. Given the most recent financial statements for FY2023. Sales for FY2024 are expected to grow by 10 percent. The following assumption must be held in the pro forma financial statements. The tax rate (percentage), the interest expense ($ amount), and the dividend payout ratio (percentage) will remain constant. COGS, SGA, Depreciation, all current asset accounts, Net PPE, intangibles, other assets, and accounts payable increase spontaneously with sales. Calculate the pro forma value for total assets for FY24 if the firm operates at full capacity and no new debt or equity is issued. (Enter percentages as decimals and round to 4 decimals) 2. Given the most recent financial statements for FY2023. Sales for FY2024 are expected to grow by 10 percent. The following assumption must be held in the pro forma financial statements. The tax rate (percentage), the interest expense ($ amount), and the dividend payout ratio (percentage) will remain constant. COGS, SGA, Depreciation, all…
Please see image to solve question.
The data required for a new investment are calculated as follows: Cost of the investment: 10.000.000 $ Annual growth rate expected from cash flows is 10% Cost of capital (discount rate): 25% Economic life of the investment: 5 years Tax rate: 40% Normal depreciation method is applied. If the firm is expected of investment every year for 5 years, the depreciation and pre-tax profit (AVOK) will be 7,000,000 TL, how much will the net current value of investment will be
Baghiben
Finnegan Company plans to Invest In a new operating plant that Is expected to cost $500,000. The projected Incremental Income from the Investment Is as follows: Net Income Year After Tax 1 $30,000 $45,000 $50,000 $55,000 $40,000 $20,000 The unadjusted rate of return on the Inltial Investment would be approximately. Multiple Choice 80% 6.0%. 16.7% 48.0%

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS