You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its prof investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment 1 $ 90 10 80 24 19 Year a. Total value b. Laputa's equity 2 $ 110 20 90 27 22 3 $ 125 25 100 30 25 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. La 40% by equity and 60% by debt. Its cost of equity is 12%, its debt yields 7%, and it pays corporate tax at 30%. a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole

You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its prof investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment 1 $ 90 10 80 24 19 Year a. Total value b. Laputa's equity 2 $ 110 20 90 27 22 3 $ 125 25 100 30 25 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. La 40% by equity and 60% by debt. Its cost of equity is 12%, its debt yields 7%, and it pays corporate tax at 30%. a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole b. What is the value of Laputa's equity? Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole

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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1a.Compute the net present value of this investment.b. Should Beyer accept the investment?
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