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 $ 81 21 60 18 10 Year 2 a. Total value b. Laputa's equity $ 101 31 78 21 13 $ 116 36 80 24 16 $ 121 41 80 24 18 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 12%, its debt yields 8%, 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 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 future. investments in new plant and working capital Earnings before interest, taxes, depreciation, and amortization (EBITDA) Depreciation Pretax profit Tax at 30% Investment $ 81 21 60 18 10 Year 2 a. Total value b. Laputa's equity $ 101 31 78 21 13 $ 116 36 80 24 16 $ 121 41 80 24 18 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 40% by equity and 60% by debt. Its cost of equity is 12%, its debt yields 8%, 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 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
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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
$ 81
21
60
18
10
Year
a. Total value
b. Laputa's equity
2
$ 101
31
70
21
13
$ 116
36
80
24
16
$ 121
41
80
24
18
From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed
40% by equity and 60% by debt. Its cost of equity is 12%, its debt yields 8%, 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 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.
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