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 will be $200 million.
b.At year-end 2016,Kenmore Air has reached maturity,and analysts expect its equity will sell for 12 times year 2016 net income.
c.At year-end 2016,Kenmore Air has $250 million of interest-bearing liabilities outstanding at an average interest rate of 10 percent.

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 will be $200 million.
b.At year-end 2016,Kenmore Air has reached maturity,and analysts expect its equity will sell for 12 times year 2016 net income.
c.At year-end 2016,Kenmore Air has $250 million of interest-bearing liabilities outstanding at an average interest rate of 10 percent.

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 will be $200 million.
b.At year-end 2016,Kenmore Air has reached maturity,and analysts expect its equity will sell for 12 times year 2016 net income.
c.At year-end 2016,Kenmore Air has $250 million of interest-bearing liabilities outstanding at an average interest rate of 10 percent.

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