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Icarus Airlines is proposing to go public and you have been given the task of estimating the value of its equity Management plans to maintain debt at 33% of the companyAc cs present value and you

Icarus Airlines is proposing to go public, and you have been given the task of estimating the value of its equity. Management plans to maintain debt at 33% of the companyAc€?cs present value, and you believe that at this capital structure the companyAc€?cs debtholders will demand a return of 7% and stockholders will require 14%. The company is forecasting that next yearAc€?cs operating cash flow (depreciation plus profit after tax at 40%) will be $71 million and that investment expenditures will be $33 million. Thereafter, operating cash flows and investment expenditures are forecast to grow in perpetuity by 4% a year.

a. What is the total value of Icarus? (Do not round intermediate calculations. Enter your answer in millions rounded to the nearest whole dollar amount.)
  Total value $  million
b.

What is the value of the companyAc€?cs equity? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.)

CompanyAc€?cs equity

Hint it is not 543 and 364; intermediate calculations should not be rounded; part b needs a number after the decimal

 

Apr 30 2020 View more View Less

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