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 50 55 15 18 171 86 Year 2 $ 94 34 60 18 21 3 $ 109 39 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 24 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. $ 114 44 78 21 26

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 50 55 15 18 171 86 Year 2 $ 94 34 60 18 21 3 $ 109 39 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 24 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. $ 114 44 78 21 26

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

Section: Chapter Questions

Problem 23SP

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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 1 $ 83 $ $ 23 60 625 375 18 12 Year From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 60% by equity and 40% by debt. its cost of equity is 14%, its debt yields 10%, and it pays corporate tax at 30% 2 $ 103 33 70 21 15 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. $ 118 38…
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 $ 70 30 $ 40 12 9 428 257 X Year 2 $90 40 50 15 12 3 $105 From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 60% by equity and 40 % by debt. Its cost of equity is 11%, its debt yields 7%, and it pays corporate tax at 30%. 45 60 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 Answer is complete but not entirely correct. 1 $ 74 24 a. Total value i b. Laputa's equity 50 15 18 326 652 € Year 2 $94 $ 189 34 60 18 21 39 70 21 24 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%. 4 $ 114 44 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…
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 40% Investment Total value million Laputa's equity $ Ask Jasper 1 DEBEH million 90 10 80 32 19 $ 2 129 3 N Year 110 20 90 36 22 $ 3 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 7%, and it pays corporate tax at 40%. 125 25 100 40 25 a. Estimate the company's total value. (Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole amount.) $ 4 130 30 100 40 27 b. What is the value of Laputa's equity? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
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 Check my work mode: This shows what is correct or incorrect for the work you have comp Answer is complete but not entirely correct. 757 a. Total value b. Laputa's equity $ $ ⓇⓇ 1 $.73 33 40 12 19 70 Year From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed 60% by equity and 40% by debt. Its cost of equity is 18%, its debt yields 9%, and it pays corporate tax at 30% 2 $93 43 50 15 22 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…
Foster Manufacturing is analyzing a capital investment project that is forecasted to produce the following cash flows and net income: After-Tax Cash Flows $(20,000) Net Income Year 1 6,000 2,000 6,000 8,000 2,000 3 2,000 8,000 2,000 Using the present value tables provided in Appendix A, the internal rate of return (rounded to the nearest whole percentage) is: а. 5%. b. 12%. C 14%. d. 40%.
You are given the following data for a project that is to be evaluated using the APV method. Year EBIT CAPEX Depreciation Increase in NWC Year-end net debt $80,000 O $201.765 O $185,617 O $193,822 0 O$222,872 Cost of net debt-8% Unlevered cost of capital = 11.8% Corporate tax rate = 30% Calculate the total value of the project at t = 0, using the APV method. O $213,918 1 $127,000 $60,000 $72,000 $50,000 $100,000 2 $133,000 $40,000 $80,000 $60,000 $140,000 3 $138,500 $10,000 $84,000 $30,000 $140,000
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If you invested $180 million into a project today, and achieved operating cash flows of $50million, $30million, $40million, $80million, and $30million, how would you measure the following: a. NPV (assuming 7.8% cost of capital) b. IRR c. How would you mathematically and verbally describe NPV relative to the IRR?
Dogwood Company is considering a capital investment in machinery: (Click the icon to view the data.) 8. Calculate the payback. 9. Calculate the ARR. Round the percentage to two decimal places. 10. Based on your answers to the above questions, should Dogwood invest in the machinery? 8. Calculate the payback. Amount invested Expected annual net cash inflow Payback 1,500,000 24 500,000 3 years 9. Calculate the ARR. Round the percentage to two decimal places. Average annual operating income Average amount invested ARR Data Table Initial investment $ 1,500,000 Residual value 350,000 Expected annual net cash inflows 500,000 Expected useful life 4 years Required rate of return 15%
Cocoa Company is evaluating an investment shown below. The investment will acquire an initial investment of RM 50,000. The cost of capital is 11 percent and the cash inflows are as follows:- Year Main Complex1 RM 15,0002 RM 10,0003 RM 12,5004 RM 15,0005 RM 30,000Based on the above information, calculate for Cocoa Company:i. Payback period ii. Net Present Value (NPV) iii. Profitability index b. After calculating the first investment, Cocoa Company found another investment.Project B costs RM1,120,000 and having payback period of 3.50 years, discountedpayback period of 4.44 years, Net Present Value (NPV) of RM 460,000 and ProfitabilityIndex of 1.41. Which project would you recommend considering all?