Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. 3. a firm has the following three projections of r

3. A firm has the following three projections of revenue estimates: Current Year1 Year 2 Year 3 Revenue...

90.2K

Verified Solution

Question

Finance

3. A firm has the following three projections of revenueestimates:

Current Year1 Year 2 Year 3

Revenue $1,500 $1,650 $1,815 $2,000

EAT $95 $106 $117 $130

The company also receives a royalty net after taxes of$10 million per year. It is expected that the cash flows equal todepreciation will have to be reinvested to keep the firm operating.Further, capital expenditures equal to 60 percent of the net cashflow will need to be invested to keep the firm growing. Other itemson the balance sheet remain unchanged. The CFO believes that itwill just forecast for the first three years and then simply assumea 6 percent annual growth rate after the third year.

T-bills yield 8 percent and the market return is 13percent. The company’s beta using Hamada equation is 1.2. What isthe value of the company or what would you pay for the firm if youwere interested in it.


Answer & Explanation Solved by verified expert
3.9 Ratings (648 Votes)
    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Accounting
1.2K views

“Before there was Paris Hilton, there was Consuelo VanderbiltBalsan – a Gilded Age heiress...

General Management
1.2K views

How did The Cradle evaluate and respond to the changing environment? Which environmental factors most affected...

Physics
1.2K views

In the figure below P and Q are two equally intense coherent sources emitting radiation...

Physics
1.2K views

3 A coin is placed on the horizontal surface of a rotating disc The distance...

Basic Math
1.2K views

2 Calculate the length of an arc between two points on the Earth s surface...

Basic Math
1.2K views

33 How many O s are there at the end of 401 681 19

Statistics
1.2K views

Following is the probability distribution of a random variable that represents the number of extracurricular...

Calculus
1.2K views

ning Time 1 hour 50 minutes 35 seconds on Completion Status we Tor um prvem...

Accounting
1.2K views

ala Manufacturing purchases land for $481,000 as part of its plans to build a new...

Accounting
1.2K views

E5-14 (Preparation of a Statement of Cash Flows) The comparative balance sheets of Constantine Cavamanlis...

Accounting
1.2K views

Prepare the balance sheet of December 31,2012 , for Mula Inc. and answer question 2...

Accounting
1.2K views

Un formato de declaracin de ingresos de varios pasos muestra clculos detallados de ventas netas...