Icarus airlines is proposing to go public and you have been


Icarus Airlines is proposing to go public, and you have been given the task of estimating the value of its equity. Management plans to maintain debt at 33% of the company's present value, and you believe that at this capital structure the company's debtholders will demand a return of 7% and stockholders will require 14%. The company is forecasting that next year's operating cash flow (depreciation ptus profit
after tax at 40%] will be $?1 million and that investment expenditures will be $33 million. Thereafter, operating cash ?ows and investment expenditures are forecast to grow in perpetuity by 4% a year.

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Business Management: Icarus airlines is proposing to go public and you have been
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