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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 40% of the company's present value, and you believe that at this capital structure the company's debt holders will demand a return of 4% and stockholders will require 8%. The company is forecasting that next year's operating cash flow (depreciation plus profit after tax at 35%) will be $55 million and that investment expenditures will be $31 million. Thereafter, operating cash flows and investment expenditures are forecast to grow by 2% a year.
A) What is the total value of Icarus? total value in millions.
B) What is the value of the company's equity? Company's equit in millions.
Suppose that a firm has a marginal tax rate of 44% and an average tax rate of 33%. What would be the tax paid on a new project that will contribute an additional $7409 to the firm's cash flow?
The average yield on preferred stock of this type among other companies is 6%. Given these conditions, what is your estimate of the market value of this company's preferred stock?
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Suppose that Mary Brown Inc. hired you as a consultant to help it estimate the cost of capital. You have been provided with the following information:
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Estimate a qualified plan in which the annual contribution is a percentage of each participant's compensation.
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Companies that are smart and conservative about their buybacks are not just creating value by maximizing float reduction, but they are also signaling to investors that they are likely well managed in other ways
Assume you are the CFO of a major company who is deciding in whether to issue debt or equity in order to finance the firms operations which are growing more than 15 percent a year,
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