Use the following information to answer the question(s) below:
-If Ideko's future expected growth rate is 5% and its WACC is 9%,then the continuation value in 2010 is closest to:
A) 164,200
B) 278,775
C) 280,450
D) 303,425
E) 482,850

Question

Use the following information to answer the question(s) below:  
-If Ideko's future expected growth rate is 5% and its WACC is 9%,then the continuation value in 2010 is closest to:
A) 164,200 
B) 278,775 
C) 280,450 
D) 303,425 
E) 482,850

Quizplus · Accepted Answer

B) After-Tax interest expense = interest expense(1 -T_c) = 8,160( 1- .35) = 5,304 (2010) Note T_c = income tax / pre-tax income = 5,678/16,223 = 35% Unlevered net income = net income + after tax interest expense = 10,545 + 5,304 = 15,849 NWC = Current assets - current liabilities = 50,872 - 10,448 = 40,424 FCF_t+1 = (1 + g) × Unlevered Net Income_T- g × New Working Capital_T - g × Fixed Assets_T FCF_t+1 = (1 + .05) × 15,849 - .05 × 40,424 - .05 × 69,392 = 11,150.65 11ea7e54_8cd8_c300_ba34_7584514d19fa_TB1620_00 278,766.25

Use the Following Information to Answer the Question(s) Below