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What is the value of the firm today to its current owner

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Reference no: EM132443180

The income statement of Mango Inc (unlevered firm) for the year just ended looks as follows:

Sales: 1000

COGS excl depreciation: 650

Depreciation: 150

NI before tax: 200

Tax: 60

NI after tax: 140

I also know that, for the same year, the CapEx was 153 and the increase in NWC was 8. The firm is in steady-state already, and it has been so for a while. The firm is expected to grow at 2% per year forever. You and the current owners agree that the discount rate is 11% forever, change in ownership or not. However, if you buy the firm, you will include it in an investment portfolio whose average cost of capital is only 10.2%. In the questions below, you may make assumptions, but you must state them clearly, and use them consistently.

  • What is the value of the firm today to its current owner?

Reference no: EM132443180

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