ou need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its vestments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment $ 79 29 50 15 13 Answer is complete but not entirely correct. Year 1019 2 $.99 39 60 18 16 om year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 level. % by equity and 40 % by debt. Its cost of equity is 12%, its debt yields 8%, and it pays corporate tax at 30%. $1 a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest w b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest w

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
Answer is complete but not entirely correct.
1,019 x
894
$.79
29
50
a. Total value
b. Laputa's equity
44853
55
15
13
Year
2
3
$.99 $ 114
44
70
21
19
39
60
18
16
4
$ 119
From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed
60% by equity and 40 % by debt. Its cost of equity is 12%, its debt yields 8%, and it pays corporate tax at 30%.
49
70
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.
21
21
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 Answer is complete but not entirely correct. 1,019 x 894 $.79 29 50 a. Total value b. Laputa's equity 44853 55 15 13 Year 2 3 $.99 $ 114 44 70 21 19 39 60 18 16 4 $ 119 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 60% by equity and 40 % by debt. Its cost of equity is 12%, its debt yields 8%, and it pays corporate tax at 30%. 49 70 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. 21 21
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