You are going to value Lauryn's Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.7, a debt-to-equity ratio of .6, and a tax rate of 21 percent. Assume a risk-free rate of 3 percent and a market risk premium of 7 percent. Lauryn's Doll Co. had EBIT last year of $58 million, which is net of a depreciation expense of $5.8 million. In addition, Lauryn's made $6.3 million in capital expenditures and increased net working capital by $2.5 million. Assume the FCF is expected to grow at a rate of 3 percent into perpetuity. What is the value of the firm? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Firm value $ 215.25 million CH
You are going to value Lauryn's Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.7, a debt-to-equity ratio of .6, and a tax rate of 21 percent. Assume a risk-free rate of 3 percent and a market risk premium of 7 percent. Lauryn's Doll Co. had EBIT last year of $58 million, which is net of a depreciation expense of $5.8 million. In addition, Lauryn's made $6.3 million in capital expenditures and increased net working capital by $2.5 million. Assume the FCF is expected to grow at a rate of 3 percent into perpetuity. What is the value of the firm? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.) Firm value $ 215.25 million CH
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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Transcribed Image Text:You are going to value Lauryn's Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported
equity beta of 1.7, a debt-to-equity ratio of .6, and a tax rate of 21 percent. Assume a risk-free rate of 3 percent and a market risk
premium of 7 percent. Lauryn's Doll Co. had EBIT last year of $58 million, which is net of a depreciation expense of $5.8 million. In
addition, Lauryn's made $6.3 million in capital expenditures and increased net working capital by $2.5 million. Assume the FCF is
expected to grow at a rate of 3 percent into perpetuity. What is the value of the firm? (Do not round intermediate calculations. Enter
your answer in millions rounded to 2 decimal places.)
Firm value
$
215.25 million
CH
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