Kenmore air weighted-average cost of capital

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Given the forecast below, estimate the fair market value per share of Kenmore Air's equity at the end of 2017 if the company has 50 million shares outstanding and the market value of its interest-bearing liabilities on the valuation date equals $300 million. Assume that after 2021, earnings before interest and tax will remain constant at $220 million, depreciation will equal capital expenditures in each year, and working capital will not change. Kenmore Air's weighted-average cost of capital is 11 percent and its tax rate is 40 percent.

Forecast for Kenmore Air, Inc.

Year

2018

2019

2020

2021

Free cash flow ($ millions)

-40

85

97

112

Reference no: EM133110760

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