You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its futu investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment $ 74 24 50 15 18 Answer is complete but not entirely correct. 171 Ⓡ 86X Year a. Total value b. Laputa's equity 2 $ 94 34 60 18 21 3 $ 109 39 70 21 24 4 $ 114 44 70 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 50% by equity and 50% by debt. Its cost of equity is 17%, its debt yields 8%, and it pays corporate tax at 30%. 21 26 a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. 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 amount.
You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its futu investments in new plant and working capital: Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment $ 74 24 50 15 18 Answer is complete but not entirely correct. 171 Ⓡ 86X Year a. Total value b. Laputa's equity 2 $ 94 34 60 18 21 3 $ 109 39 70 21 24 4 $ 114 44 70 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 50% by equity and 50% by debt. Its cost of equity is 17%, its debt yields 8%, and it pays corporate tax at 30%. 21 26 a. Estimate the company's total value. Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount. 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 amount.
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 need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its future
investments in new plant and working capital:
Earnings before interest, taxes, depreciation, and amortization (EBITDA)
Depreciation
Pretax profit
Tax at 30%
Investment
Answer is complete but not entirely correct.
a. Total value
b. Laputa's equity
$74
24
171
SOFI
86 X
50
15
18
Year
2
$ 94
34
From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed
50% by equity and 50% by debt. Its cost of equity is 17%, its debt yields 8%, and it pays corporate tax at 30%.
60
18
21
a. Estimate the company's total value.
Note: Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount.
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 amount.
3
$ 189
39
70
21
24
4
$ 114
44
70
21
26
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