Use the following information for numbers 23 to 25:Corporate Valuators, Inc. is assessing the value of two companies, Capital Corp. and Earm, Inc. which projects the followingnet cash flows in the next five years, with its desired required rate of return. Net cash flows approximate to be its earningsalso. The balance sheet of Capital Corp. and Eam, Inc. has recorded Property, Plant and Equipment of P100 million andP200 million, respectively. Operating assets are estimated at 80% and 70% respectively and the rest are considered idle.Capital Corp.8,000,0008,800,0009,680,00010,648,00011,712,800Required return 8%Net cash flows Net cash flowsEarn, Inc.9,600,00010,560,00011,616,00012,777,00014,055,36%Year123423. Using capitalization of earnings, compute for the equity value of Capital Corp.24. Using capitalization of earnings, compute for the equity value of Eam, Inc.25. Which company has higher equity value?

Given information : Year Capital corp Earn inc. 1 8000000 9600000 2 8800000 10560000 3…

tively. Operating assets are estimated at 80% and 70% respecti et cash flows Net cash flows apital Corp. 000,000 800,000 680,000 0,648,000 1,712,800 Earn, Inc. 9,600,000 10,560,000 11,616,000 12,777,000 14,055,360 6%

tively. Operating assets are estimated at 80% and 70% respecti et cash flows Net cash flows apital Corp. 000,000 800,000 680,000 0,648,000 1,712,800 Earn, Inc. 9,600,000 10,560,000 11,616,000 12,777,000 14,055,360 6%

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 2MAD: Assume San Lucas Corporation in MAD 26-1 assigns the following probabilities to the estimated annual...

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