The following is a four-year forecast for Torino Marine. Year 2022 2023 2024 2025 Free cash flow ($ millions) −59 80 97 119 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 12 percent and its tax rate is 40 percent. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place. Estimate the fair market value per share of Torino Marine’s equity at the end of 2021 if the company has 44 million shares outstanding and the market value of its interest-bearing liabilities on the valuation date equals $340 million. Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
The following is a four-year forecast for Torino Marine. Year 2022 2023 2024 2025 Free cash flow ($ millions) −59 80 97 119 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 12 percent and its tax rate is 40 percent. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place. Estimate the fair market value per share of Torino Marine’s equity at the end of 2021 if the company has 44 million shares outstanding and the market value of its interest-bearing liabilities on the valuation date equals $340 million. Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
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
Section: Chapter Questions
Problem 1PS
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Question
The following is a four-year
| Year | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| −59 | 80 | 97 | 119 |
- 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 12 percent and its tax rate is 40 percent.Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.
- Estimate the fair market value per share of Torino Marine’s equity at the end of 2021 if the company has 44 million shares outstanding and the market value of its interest-bearing liabilities on the valuation date equals $340 million.
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Transcribed Image Text:3
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The following is a four-year forecast for Torino Marine.
Year
Free cash flow ($ millions)
2022
-59
a. Fair market value
b. Fair market value per share
80
a. Estimate the fair market value of Torino Marine at the end of 2021. Assume that after 2025, earnings before interest and tax w
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 12 percent and its tax rate is 40 percent.
Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.
2025
b. Estimate the fair market value per share of Torino Marine's equity at the end of 2021 if the company has 44 million shares
outstanding and the market value of its interest-bearing liabilities on the valuation date equals $340 million.
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
million
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