Please GIve Step by Step AnswerI give Thumb Up 14You need to estimate the value of Laputa Aviation. You have the following forecasts (in millions of dollars) of its profits and of its futureinvestments in new plant and working capital:Year12340.59pointsEarnings before interest, taxes, depreciation, and amortization (EBITDA)Depreciation$ 71$ 91$ 106$ 11111212631Pretax profit60708080Tax at 30%18212424SkippedInvestment8111416From year 5 onward, EBITDA, depreciation, and investment are expected to remain unchanged at year-4 levels. Laputa is financed50% by equity and 50% by debt. Its cost of equity is 20%, its debt yields 6%, and it pays corporate tax at 30%.eBookPrinta. 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.a. Total valueReferencesb. Laputa's equity

step: 1Explanation:Given information , Cost of debt (Kd) is 6% Cost of equity (Ke) = 20% Weight of…

Answered: 14 You need to estimate the value of…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter11: The Cost Of Capital

Section: Chapter Questions

Problem 20PROB

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Begin with the partial model in the file Ch02 P21 Build a Model.xlsx on the textbooks Web site. a. Using the financial statements shown here for Lan Chen Technologies, calculate net operating working capital, total net operating capital, net operating profit after taxes, free cash flow, and return on invested capital for 2020. The federal-plus-state tax rate is 25%. b. Assume there were 15 million shares outstanding at the end of 2019, the year-end closing stock price was 65 per share, and the after-tax cost of capital was 10%. Calculate EVA and MVA for 2020. Lan Chen Technologies: Income Statements for Year Ending December 31 (Millions of Dollars) Lan Chen Technologies: December 31 Balance Sheets (Thousands of Dollars)
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) $ 85 $ 105 $ 120 $ 125 Depreciation 25 35 40 45 Pretax profit 60 70 80 80 Tax at 40% 24 28 32 32 Investment 14 17 20 22 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 16%, its debt yields 7%, and it pays corporate tax at 40%. a. Estimate the company’s total value. (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?
6. A company will invest $37,072 on a capital expenditure (an asset with multi-year use). They estimate it will save $25,166 per year for the next 2 years. If their TVOM is 5.89%, what is the worth of the investment per year? (be sure to include the sign)
4. A project capitalized for ₱150,000 invested in depreciable assets will earn a uniform, annual income of ₱59, 547 in 10 years. The costs for operation and maintenance total ₱27,000a year, and taxes and insurance will cost 4% of the first cost each year. If the company expects its capital to earn12% before income taxes, is the investment worthwhile? Show by: Present worth method. Solve and show the soulution.
4. A project capitalized for ₱150,000 invested in depreciable assets will earn a uniform, annual income of ₱59, 547 in 10 years. The costs for operation and maintenance total ₱27,000a year, and taxes and insurance will cost 4% of the first cost each year. If the company expects its capital to earn12% before income taxes, is the investment worthwhile? Show by: Rate of return Solve and show the solution.
A4 9c We find the following information on NPNG (No-Pain-No-Gain) Inc.: EBIT = $2,000,000Depreciation = $250,000Change in net working capital = $100,000Net capital spending = $300,000 These numbers are projected to increase at the following supernormal rates for the next three years, and 5% after the third year for the foreseeable future: EBIT: 20%Depreciation: 10%Change in net working capital: 15%Net capital spending: 10% The firm’s tax rate is 35%, and it has 1,000,000 outstanding shares and $8,000,000 in debt. We have estimated the WACC to be 15%. c. Calculate the firm’s share price at time 0.
1. A company has determined that a certain project will produce revenue of $14 million 1 year from now. The costs are projected to equal $5 million each 2, 3 and 4 years from now. Given a cost of capital of 10%, the Net Present Value of the project equals:$1.42 million $1.56 million$12.72 million$14.00 million
QUESTION 33 Advanced Products is considering the purchase of a computer-aided manufacturing system that requires an initial investment of $1,750,000 and is expected to provide an increase in net income of $200,000 and average annual cash benefits and savings of $250,000 each year for the next 10 years. Their current cost of capital is 10%. Following are selected factors from tables for 10 years at 10%: FV of $1 FVOA PV of $1 PVOA 2.59374 15.93742 0.38554 6.14457 Required: Compute the present value of the cash inflows/savings $1,536,142.50 $648,435 $963,850 $2,500,000
QUESTION 37 Advanced Products is considering the purchase of a computer-aided manufacturing system that requires an initial investment of $1,750,000 and is expected to provide an increase in net income of $200,000 and average annual cash benefits and savings of $250,000 each year for the next 10 years. Their current cost of capital is 10%. Following are selected factors from tables for 10 years at 10%: FV of $1 FVOA PV of $1 PVOA 2.59374 15.93742 0.38554 6.14457 Required: Evaluate the investment Both Payback and Accounting Rate of Return measures support the decision to purchase of a computer-aided manufacturing system, but do not consider the time value of money. The net present value is negative which is favorable. There are other relevant variables that need to be considered such as any changes in operating costs and any non-financial or qualitative factors. Both Payback and Accounting Rate of Return measures support…
Given the initial investment in a factory processing equipment as Ghc500,037. Let the opportunity cost of capital for the industry be 10% p.a. Assuming that the equipment is capable of generating an after-tax returns of Ghc115,000 for the first 5 years and Ghc65000 for the 6th year and Ghc53400 for the 7th year. a. Find the Net Present Value (NPV) b. Determine the Internal Rate of Return c. Identify three ways in which the Net Present value is superior to the Internal Rate of
Revenues generated by a new fad product are forecast as follows: Year Revenues 1 60,000 2 40,000 3 30,000 4 10,000 Thereafter 0 Expenses are expected to be 30% of revenues, and working capital required in each year is expected to be 10% of revenues in the following year. The product requires an immediate investment of $81,000 in plant and equipment. a). What is the inital investment in the product? Rememebr working capital. b).If the plant and equipment are depreciated over 4 years to a slavage value of zero using straight-line depreciation, and the firm's tax rate is 20%, what are the project cash flows in each year? Assume the plant and equipment are worthless at the end of 4 years. c). If the opportunity cost of capital is 10%, what is the project's NPV? d). What is the project IRR?
QUESTION 36 Advanced Products is considering the purchase of a computer-aided manufacturing system that requires an initial investment of $1,750,000 and is expected to provide an increase in net income of $200,000 and average annual cash benefits and savings of $250,000 each year for the next 10 years. Their current cost of capital is 10%. Following are selected factors from tables for 10 years at 10%: FV of $1 FVOA PV of $1 PVOA 2.59374 15.93742 0.38554 6.14457 Required: Compute the Accounting Rate of Return of the investment 14.3% 8% 10% 11.4%

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