What is the value of the company in 2012

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Kollmorgen Corporation, a diversified technology company, reported sales of $194.9 million in 2012, and had a net loss of $1.9 million in that year. Its net income had traced a fairly volatile course over the previous five years:

Year

Net Income

2008

$11.8 million

2009

-$2.4 million

2010

$7.2 million

2011

-$4.6 million

2012

-$1.9 million

The stock had a beta of 1.50, and the normalized net income is expected to increase at 10% a year until 2016, after which the growth rate is expected to stabilize at 5% a year (the beta will also drop from 1.50 to 1.00 after 2016). The depreciation amounted to $8 million in 2012, and capital spending amounted to $10 million in that year. Both items are expected to grow at 5% a year from 2013 to 2016, but after 2016 depreciation will equal capital spending. The firm expects to maintain a debt ratio (D/D+E) of 35%. The 10-year Government bond rate is 3.5% and the market risk premium is 6%.

What is the value of the company in 2012?

Reference no: EM133057152

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