Assume that today is December 31, 2022, and the following information applies to Xavier Airlines: -After-tax operating income [EBIT (1 - T)] for the just ended year is $900 million. -The depreciation expense for the just ended year was $140 million. -The capital expenditure for the just ended year was $225 million. -There was no change in net operating working capital from the previous year. -Analysts estimate that Xavier’s free cash flow is expected to grow on average, at a rate of 8% per year for the next 5 years after which growth is expected to moderate to 4% at a constant rate. -The weighted average cost of capital (WACC) for Xavier is 10%. -The market value of the company's debt is $2.875 billion. -Xavier has 300 million shares of stock are outstanding. Using the corporate valuation model approach, what should be: a. The value of Xavier Airlines today (the firm)? b. The value of Xavier Airlines’ Common Equity? c. The intrinsic value of Xavier’s stock price today?
Assume that today is December 31, 2022, and the following information applies to Xavier
Airlines:
-After-tax operating income [EBIT (1 - T)] for the just ended year is $900 million.
-The
-The capital expenditure for the just ended year was $225 million.
-There was no change in net operating working capital from the previous year.
-Analysts estimate that Xavier’s
8% per year for the next 5 years after which growth is expected to moderate to 4% at a
constant rate.
-The weighted average cost of capital (WACC) for Xavier is 10%.
-The market value of the company's debt is $2.875 billion.
-Xavier has 300 million shares of stock are outstanding.
Using the corporate valuation model approach, what should be:
a. The value of Xavier Airlines today (the firm)?
b. The value of Xavier Airlines’ Common Equity?
c. The intrinsic value of Xavier’s stock price today?
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