Using the fcf model-what is the value of the firm

Assignment Help Financial Management

Reference no: EM131065592

You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn has a reported equity beta of 1.7, a debt-to-equity ratio of .6, and a tax rate of 30 percent. Assume a risk-free rate of 3 percent and a market risk premium of 7 percent. Lauryn’s Doll Co. had EBIT last year of $58 million, which is net of a depreciation expense of $5.8 million. In addition, Lauryn made $6.3 million in capital expenditures and increased net working capital by $2.5 million. Assume her FCF is expected to grow at a rate of 3 percent into perpetuity. What is the value of the firm?

Reference no: EM131065592

Questions Cloud

What price should be set under marginal cost pricing : Assume a clinical laboratory is considering a new test. Here are the key assumptions: annual fixed direct costs = $20,000, annual overhead allocation = $10,000, variable cost per test = $5, and expected volume = 5,000 tests. What price should be set ..

Cost containment-payer negotiations-joint venture activities : The role of finance in healthcare has increased in importance over time because the finance function must support a multitude of activities, such as cost containment, payer negotiations, and joint venture activities.

About the odd dividend policy : Hot Wings, Inc., has an odd dividend policy. The company has just paid a dividend of $10.00 per share and has announced that it will increase the dividend by $8.00 per share for each of the next four years, and then never pay another dividend.

Assess short-term liquidity by looking at firm current ratio : Assume XYZ Corp. had a current ratio of 12.5 You are the CFO of XYZ Corp. Would you argue the high current ratio is good or bad? Why? Ratios provide us with the ability to quickly assess a particular item. We can quickly assess short-term liquidity b..

Using the fcf model-what is the value of the firm : You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn has a reported equity beta of 1.7, a debt-to-equity ratio of .6, and a tax rate of 30 percent. Assume her FCF is expected to grow at ..

Considering project with cash inflows : Curtis is considering a project with cash inflows of $918, $867, $528, and $310 over the next four years, respectively. The relevant discount rate is 11 percent. What is the net present value of this project if it the start up cost is $2,100?

What level of pretax cost savings : Your firm is contemplating the purchase of a new $1,036,000 computer-based order entry system. The system will be depreciated straight-line to zero over its 5-year life. It will be worth $100,800 at the end of that time. At what level of pretax cost ..

Tax increase affect investment in the wind industry : A recent study estimated the elasticity of investment in wind energy with respect to the user cost of capital to be the about -1.5. In 2013 the top tax rate on dividends from wind energy investments increased from 15% to 23.8%. How does this tax incr..

What is the effective annual return on lending business : Friendly’s Quick Loans, Inc., offers you “$4.70 for $5.70 or I knock on your door.” This means you get $4.70 today and repay $5.70 when you get your paycheck in one week (or else). If you were brave enough to ask, what APR would Friendly’s say you we..

User Account

All Pages