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Victoria Enterprises expects earnings before interest and taxes ​(EBIT​) next year of $ 1.2 million. Its depreciation and capital expenditures will both be $ 307 comma 000​, and it expects its capital expenditures to always equal its depreciation. Its working capital will increase by $ 55 comma 000 over the next year. Its tax rate is 32 %. If its WACC is 10 % and its FCFs are expected to increase at 3 % per year in​ perpetuity, what is its enterprise​ value?

Respuesta :

Answer:

$10,871,428.6

Explanation:

Next year FCF :

= [Earnings before interest and taxes (EBIT) × (1 - tax rate)] + Depreciation - Capital expenditures - Working capital

= [(1.2 × 1,000,000) × (1 - 32%)] + $307,000 - $307,000 - $55,000

= $816,000 - $55,000

= $761,000

Enterprise value :

= FCF next year ÷ (WACC - g)

= $761,000 ÷ (10% - 3%)

= $10,871,428.6

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