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If LKJ Company has the following financial data, what is the Free Cash Flow? EBIT of...

If LKJ Company has the following financial data, what is the Free Cash Flow? EBIT of $785,600. Depreciation expense of $175,800. Capital expenditures of $132,750. Net working capital decrease of $36,180. Tax rate is 30%. LJK equity beta is 1.72 with a debt to equity ratio of .4. What is the asset beta for this company?

Once that is determined, what is the discount rate if the risk free rate is 1.65% and the market premium is 8.8%?

Using all the information above, what is the value of the company if the growth rate is 4.6%

Solutions

Expert Solution

Asset beta= 1.72

Discount rate= 1.65+ 1.72*(8.8)= 16.786%

Terminal value is calculated at year 2 i.e. FCFF3/ (R-G)

= 946224.34/(0.16786-0.046)

TAX 30%
EBIT                785,600 WC DECREASE          36,180
DEP                175,800
CAPEX                132,750
Ebit                785,600
add DEP                175,800
add WC DECREASE                  36,180
less CAPEX                132,750 Discount Rate=
FCFF                864,830 12.21
                      0.12 4.60% 4.60%
Year 1 Year 2
FCFF                864,830 904612.2 946224.3403
12433960 tv at year 2
VALUE OF COMPANY          11,080,973

jeff jeffy answered 1 year ago
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