You are going to value Lauryn's Doll Company using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.6, a debt-to-equity ratio of 0.6, and a tax rate of 21 percent. Assume a risk-free rate of 6 percent and a mark risk premium of 8 percent. Lauryn's Doll Company had EBIT last year of $53 million, which is net of a depreciation expense of $5.3 million. In addition, Lauryn's made $4.75 million in capital expenditures and increased net working capital by $3.1 million. Assume the FCF is expected to grow at a rate of 2 percent into perpetuity. What is the value of the firm? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. Answer is complete but not entirely correct. Firm value $ 326.94 million

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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You are going to value Lauryn's Doll Company using the FCF model. After consulting various sources, you find that Lauryn's has a
reported equity beta of 1.6, a debt-to-equity ratio of 0.6, and a tax rate of 21 percent. Assume a risk-free rate of 6 percent and a market
risk premium of 8 percent. Lauryn's Doll Company had EBIT last year of $53 million, which is net of a depreciation expense of $5.3
million. In addition, Lauryn's made $4.75 million in capital expenditures and increased net working capital by $3.1 million. Assume the
FCF is expected to grow at a rate of 2 percent into perpetuity. What is the value of the firm?
Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.
> Answer is complete but not entirely correct.
Firm value
$ 326.94 million
Transcribed Image Text:You are going to value Lauryn's Doll Company using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.6, a debt-to-equity ratio of 0.6, and a tax rate of 21 percent. Assume a risk-free rate of 6 percent and a market risk premium of 8 percent. Lauryn's Doll Company had EBIT last year of $53 million, which is net of a depreciation expense of $5.3 million. In addition, Lauryn's made $4.75 million in capital expenditures and increased net working capital by $3.1 million. Assume the FCF is expected to grow at a rate of 2 percent into perpetuity. What is the value of the firm? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. > Answer is complete but not entirely correct. Firm value $ 326.94 million
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