Consider the table given below to answer the following question. Year Asset value Earnings Net investment Free cash flow Return on equity Asset growth rate Earnings growth rate 1 9.00 1.44 1.44 0.00 0.16 0.16 Present value 2 10.44 million 1.67 1.67 0.00 0.16 0.16 0.16 3 12.11 1.94 1.94 0.00 0.16 0.16 0.16 4 5 6 14.05 15.87 17.94 2.54 2.78 2.06 2.33 0.48 0.45 0.16 0.155 0.13 0.13 0.13 0.09 2.25 1.83 0.42 0.16 0.13 0.16 8 22.30 3.23 2.23 1.00 7 20.27 9 24.53 2.94 3.04 2.03 2.45 1.01 0.49 0.12 0.15 0.145 0.10 0.06 -0.09 0.10 0.10 0.09 10 26.98 Assuming that competition drives down profitability (on existing assets as well as new investment) to 15.5% in year 6, 15% in year 7, 14.5% in year 8, and 12% in year 9 and all later years. What is the value of the concatenator business? Assume 13% cost of capital. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. 3.24 2.70 0.54 0.12 0.10 0.10
Consider the table given below to answer the following question. Year Asset value Earnings Net investment Free cash flow Return on equity Asset growth rate Earnings growth rate 1 9.00 1.44 1.44 0.00 0.16 0.16 Present value 2 10.44 million 1.67 1.67 0.00 0.16 0.16 0.16 3 12.11 1.94 1.94 0.00 0.16 0.16 0.16 4 5 6 14.05 15.87 17.94 2.54 2.78 2.06 2.33 0.48 0.45 0.16 0.155 0.13 0.13 0.13 0.09 2.25 1.83 0.42 0.16 0.13 0.16 8 22.30 3.23 2.23 1.00 7 20.27 9 24.53 2.94 3.04 2.03 2.45 1.01 0.49 0.12 0.15 0.145 0.10 0.06 -0.09 0.10 0.10 0.09 10 26.98 Assuming that competition drives down profitability (on existing assets as well as new investment) to 15.5% in year 6, 15% in year 7, 14.5% in year 8, and 12% in year 9 and all later years. What is the value of the concatenator business? Assume 13% cost of capital. Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places. 3.24 2.70 0.54 0.12 0.10 0.10
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter7: Corporate Valuation And Stock Valuation
Section: Chapter Questions
Problem 25SP: Start with the partial model in the file Ch07 P25 Build a Model.xlsx on the textbook’s Web site....
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