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 40% of the company's present value, and you believe that at this capital structure the company's debt holders will demand a return of 4% and stockholders will require 8%. The company is forecasting that next year's operating cash flow (depreciation plus profit after tax at 35%) will be $55 million and that investment expenditures will be $31 million. Thereafter, operating cash flows and investment expenditures are forecast to grow by 2% a year.
A) What is the total value of Icarus? total value in millions.
B) What is the value of the company's equity? Company's equit in millions.