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In 2016, Luckypaper Inc. had operating income before interest and tax of $300 million. The...

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Finance

In 2016, Luckypaper Inc. had operating income before interest and tax of $300 million. The firm was expected to generate this level of operating income indefinitely. Luckypaper Inc. had depreciation expense of $20 million that year. Capital spending totaled $40 million during 2016. At the end of 2015 and 2016, working capital totaled $100 million and $120 million respectively. The firms statutory tax rate is 17% and its outstanding debt had a market value of $91 million. The 10-year Treasury bond rate is 6.5% and the borrowing rate for companies exhibiting level of creditworthiness similar to Luckypaper Inc. is 6.7%. The market risk premium is 5.0%. Luckypaper Inc.s beta is estimated to be 1.3. Luckypaper Inc.s target debt-to-total capital ratio is 40%. What is the enterprise value of the firm at the end of 2016, assuming it will generate the value of free cash flow indefinitely?

a. 2,992.7 million

b. 1,994.3 million

c. 2,084.9 million

d. Not sufficient data to estimate

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