The following is a four-year forecast for Torino Marine. Year Free cash flow (5 millions) 2022 -52 a Fair market value b. Fair market value per share 2023 73 2024 90 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 10 percent and its tax rate is 30 percent. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place. million 2025 112 b. Estimate the fair market value per share of Torino Marine's equity at the end of 2021 if the company has 37 million shares outstanding and the market value of its interest-bearing liabilities on the valuation date equals $270 million. Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
The following is a four-year forecast for Torino Marine. Year Free cash flow (5 millions) 2022 -52 a Fair market value b. Fair market value per share 2023 73 2024 90 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 10 percent and its tax rate is 30 percent. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place. million 2025 112 b. Estimate the fair market value per share of Torino Marine's equity at the end of 2021 if the company has 37 million shares outstanding and the market value of its interest-bearing liabilities on the valuation date equals $270 million. Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:The following is a four-year forecast for Torino Marine.
Year
Free cash flow ($ millions)
2022
-52
a Fair market value
b. Fair market value per share
2023
73
2024
90
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 10 percent and its tax rate is 30 percent.
Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.
million
2025
112
b. Estimate the fair market value per share of Torino Marine's equity at the end of 2021 if the company has 37 million shares
outstanding and the market value of its interest-bearing liabilities on the valuation date equals $270 million.
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
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