The following table presents a four-year forecast for Kenmore Air, Inc.:

-Estimate the fair market value of Kenmore Air's equity per share at the end of 2012 under the following assumptions:
a.EBIT in year 2016 is $200 million,and then grows at 5 percent per year forever.
b.To support the perpetual growth in EBIT,capital expenditures in year 2017 exceed depreciation by $30 million,and this difference grows 5 percent per year forever.
c.Similarly,working capital investments are $15 million in 2017,and this amount grows 5 percent per year forever.

Question

The following table presents a four-year forecast for Kenmore Air, Inc.:
 
-Estimate the fair market value of Kenmore Air's equity per share at the end of 2012 under the following assumptions:
a.EBIT in year 2016 is $200 million,and then grows at 5 percent per year forever.
b.To support the perpetual growth in EBIT,capital expenditures in year 2017 exceed depreciation by $30 million,and this difference grows 5 percent per year forever.
c.Similarly,working capital investments are $15 million in 2017,and this amount grows 5 percent per year forever.

Quizplus · Accepted Answer

The Answer of The following table presents a four-year forecast for Kenmore Air, Inc.:
 
-Estimate the fair market value of Kenmore Air's equity per share at the end of 2012 under the following assumptions:
a.EBIT in year 2016 is $200 million,and then grows at 5 percent per year forever.
b.To support the perpetual growth in EBIT,capital expenditures in year 2017 exceed depreciation by $30 million,and this difference grows 5 percent per year forever.
c.Similarly,working capital investments are $15 million in 2017,and this amount grows 5 percent per year forever.

The Following Table Presents a Four-Year Forecast for Kenmore Air