Exam (102).pdf - Question Company Valuation.You need to estimate the value of Laputa Aviation You have the following forecasts(in millions of dollars of

Exam (102).pdf - Question Company Valuation.You need to...

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Question: Company Valuation.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:  Year  1 2 3 4 Earnings before interest, taxes, depreciation, and amortization (EBITDA) 80 100 115 120 Depreciation 20 30 35 40 Pretax profit 60 70 80 80 Tax at 40% 24 28 32 32 Investment 12 15 18 20 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 15%, its debt yields 7%, and it pays corporate tax at 40%. a. Estimate the company’s total value. b. What is the value of Laputa’s equity? Answer :
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Consider a corporation LA for which anticipated profit, investment and working capital statement is given. It is required to compute the following: a. Compute the total value of the firm as shown below: Free cash flow (FCF) FCF is used as a measure of financial performance of a firm. It is
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