What is the value of the company equity

Assignment Help Financial Accounting
Reference no: EM132892229

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 20% of the company's present value, and you believe that at this capital structure the company's debt holders will demand a return of 8% and stockholders will require 11%. The company is forecasting that next year's operating cash flow (depreciation plus profit after tax at 21%) will be $58 million and that investment in plant and net working capital will be $20 million. Thereafter, operating cash flows and investment expenditures are forecast to grow in perpetuity by 4% a year.

Problem a. What is the total value of Icarus?

Problem b. What is the value of the company's equity?

Reference no: EM132892229

Questions Cloud

What action should be taken with respect to the accounting : What action should be taken with respect to the accounting estimates? If an investigation during 2021-22 finds that the figure for warranty expense
Consequence parameters and threshold documented : Where are the likelihood and consequence parameters and threshold documented?
Credibility for academic work versus professional work : Compare and contrast these sources as to their applicability and credibility for academic work versus professional work.
What is the price of a three-month european call option : Consider a non-dividend-paying stock with a current share. What is the price of a three-month European call option on the stock with a strike price of 160p?
What is the value of the company equity : What is the value of the company's equity? Icarus Airlines is proposing to go public, and you have been given the task of estimating the value.
What is total profit per share if the stock price declines : You just bought 200 shares of Ford stock for $5 a share. What is total profit per share if the stock price declines to $0 a share at expiration?
What is universal wacc : What is Universal's WACC? Universal Foods has a debt-to-value ratio of 50%, its debt is currently selling on a yield of 8% and its cost of equity is 12%.
Explain a change in reporting entity : Explain a change in reporting entity and how a company reports it. Give an appropriate example of a change in reporting entity
Explain how employment law was applied in issue resolution : Select a past or current issue in employment law in the United States.

Reviews

Write a Review

Financial Accounting Questions & Answers

  What are the expected net operating cash flows per year

What are the Expected net operating cash flows per year? Should Anna recommend that the J Corporation build the factory? What is the Net Present Value?

  How much money you should save right now in the bank

If the college you enter is 4 years and the tuition for each year is $100,000 per year. How much money you should save right now in the bank

  How much cash did the company collect

Question - During the current year, accounts receivable increased from $27,000 to $41,000, and sales were $225,000. How much cash did the company collect

  Started operations-direct materials costing

Allison's Engines started operations on January 1, 2012. During the Month the following events occurred: Materials costing $6500 were purchased on account, Direct materials costing $3000 were placed in process

  Compute the loan payment under each option for year

Dundar Mifflin has applied for a $3,500,000 loan from the TD Bank. Compute the loan payment under each option for year 1

  Find which rate of return does investor expect to receive

Which rate of return does the investor expect to receive on this stock if the stock is purchased today? Round answer to two decimal places in percentage form.

  Prepare the declared cash dividends for the preferred stock

Prepare the Declared cash dividends of $5.00 for the preferred stock an $.50 per share on common stock. Paid in Capital in Excess of par Preferred Stock.

  What is the approximate inventory on February

A fire destroys all of the merchandise of Sheridan Company on February 10, 2017. What is the approximate inventory on February 10, 2017

  What per-visit price must be set for service to breakeven

Assume that the managers of Dominion Healthcare facility are setting the price on a new outpatient service. What per-visit price must be set for the service to breakeven? To earn an annual profit of $100,000? Repeat Part a, but assume that the variab..

  Determine valuation of current liabilities and contingencies

Discuss fully the accounting treatment and disclosures that should be accorded the casualty and related contingent losses in the financial statements dated December 31, 2012.

  Explain the risk-return relationship

Explain the risk/return relationship for the answer to question A?

  How much is the interest income on january

On January 1, 20x1, Entity A acquires 5-year, 5%, ?1,000,000 face amount bonds for ?957,876. How much is the interest income in 20x1?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd