Will be $67 million and that investment expenditures

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Question: 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 29% of the company's present value, and you believe that at this capital structure the company's debtholders will demand a return of 7% and stockholders will require 14%. The company is forecasting that next year's operating cash flow (depreciation plus profit after tax at 21 %) will be $67 million and that investment expenditures will be $29 million. Thereafter, operating cash flows and investment expenditures are forecast to grow in perpetuity by 4% a year.

Reference no: EM133558150

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