A company has net operating assets of $240 million, an expected EBIT of $42 million and...

A company has net operating assets of $240 million, an expected EBIT of $42 million and a WACC of 9.9%. What is the current market value of the company's operations if its residual operating income is constant in perpetuity and the corporate tax rate is 30%?

Expert Solution

Residual Operating income = NOPAT - Operating Assets * WACC

Residual Operating income = (42 * (1 - 30%)) - 240 * 9.9%

Residual Operating income = 5.64 millions

Market value of operation = Residual operating income / WACC

Market value of operation = 5.64 / 9.9%

Market value of operation = 56.97 millions

jeff jeffy answered 2 years ago

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