You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources,...

You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.6, a debt-to-equity ratio of 0.4, and a tax rate of 40 percent. Assume a risk-free rate of 5 percent and a market risk premium of 12 percent. Lauryn’s Doll Co. had EBIT last year of $51 million, which is net of a depreciation expense of $5.1 million. In addition, Lauryn's made $7.5 million in capital expenditures and increased net working capital by $4.5 million. Assume the FCF is expected to grow at a rate of 4 percent into perpetuity. What is the value of the firm? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

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Expert Solution

All the calculation is done in excel and related formulas are mentioned on the side.

Hence value of the firm = $174.279 million

jeff jeffy answered 1 year ago

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