Problem 9-11The following is a four-year forecast for Torino Marine.YearFree cash flow ($ millions)2022-492023702024202587109a. Estimate the fair market value of Torino Marine at the end of 2021. Assume that after 2025, earnings before interest and tax willremain constant at $200 million, depreciation will equal capital expenditures in each year, and working capital will not change.Torino Marine's weighted-average cost of capital is 15 percent and its tax rate is 30 percent.Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.b. Estimate the fair market value per share of Torino Marine's equity at the end of 2021 if the company has 34 million sharesoutstanding and the market value of its interest-bearing liabilities on the valuation date equals $240 million.Note: Do not round intermediate calculations. Round your answer to 2 decimal places.a. Fair market valueb. Fair market value per sharemillion

The objective of the question is to estimate the fair market value of Torino Marine at the end of…

Answered: Problem 9-11 The following is a…

Cornerstones of Financial Accounting

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Publisher:Jay Rich, Jeff Jones

ChapterA3: Time Value Of Money

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Problem 9-11
The following is a four-year forecast for Torino Marine.
Year
Free cash flow ($ millions)
2022
-49
2023
70
2024
2025
87
109
a. Estimate the fair market value of Torino Marine at the end of 2021. Assume that after 2025, earnings before interest and tax will
remain constant at $200 million, depreciation will equal capital expenditures in each year, and working capital will not change.
Torino Marine's weighted-average cost of capital is 15 percent and its tax rate is 30 percent.
Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.
b. Estimate the fair market value per share of Torino Marine's equity at the end of 2021 if the company has 34 million shares
outstanding and the market value of its interest-bearing liabilities on the valuation date equals $240 million.
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
a. Fair market value
b. Fair market value per share
million

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