and all later years. What is the value of the concatenator business? Assume 12% cost of capital. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Present value million
and all later years. What is the value of the concatenator business? Assume 12% cost of capital. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Present value million
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter3: Risk And Return: Part Ii
Section: Chapter Questions
Problem 4P
Related questions
Question
![Consider the table given below to answer the following question.
Asset value
Earnings
Net investment
Free cash flow (FCF)
Return on equity (ROE)
Asset growth rate
Earnings growth rate
Present value
1
2
3
4
5
6
7
8
9.00 10.17 11.49 12.99 14.28 15.71 17.28 18.49
1.17 1.32 1.49 1.69 1.86 1.96 2.07 2.13
1.17 1.32 1.49 1.30 1.43 1.57 1.21 1.29
0.39 0.43 0.39 0.86 0.83
0.13 0.13 0.13 0.125 0.12 0.115
0.13 0.10 0.10 0.10 0.07 0.07
0.13 0.13 0.10 0.06 0.06 0.03
0.13 0.13
0.13 0.13
0.13
Year
Assuming that competition drives down profitability (on existing assets as well as
new investment) to 12.5% in year 6, 12% in year 7, 11.5% in year 8, and 9% in year 9
and all later years. What is the value of the concatenator business? Assume 12% cost
of capital. (Do not round intermediate calculations. Enter your answer in millions
rounded to 2 decimal places.)
million](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F871bc9f6-b0c1-423f-825b-d287766fac96%2F9359d773-a87c-422a-b421-957f1a83a772%2Fdkexdfqn_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider the table given below to answer the following question.
Asset value
Earnings
Net investment
Free cash flow (FCF)
Return on equity (ROE)
Asset growth rate
Earnings growth rate
Present value
1
2
3
4
5
6
7
8
9.00 10.17 11.49 12.99 14.28 15.71 17.28 18.49
1.17 1.32 1.49 1.69 1.86 1.96 2.07 2.13
1.17 1.32 1.49 1.30 1.43 1.57 1.21 1.29
0.39 0.43 0.39 0.86 0.83
0.13 0.13 0.13 0.125 0.12 0.115
0.13 0.10 0.10 0.10 0.07 0.07
0.13 0.13 0.10 0.06 0.06 0.03
0.13 0.13
0.13 0.13
0.13
Year
Assuming that competition drives down profitability (on existing assets as well as
new investment) to 12.5% in year 6, 12% in year 7, 11.5% in year 8, and 9% in year 9
and all later years. What is the value of the concatenator business? Assume 12% cost
of capital. (Do not round intermediate calculations. Enter your answer in millions
rounded to 2 decimal places.)
million
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