Assume that today is December 31, 2014, and that the following information applies the Vermeil Airlines:
Revenue for 2015 is expected to be $1,750 million
Operating Expenses (including depreciation and amortization) are expected to be $1,075 million
Depreciation and amortization for 2015 will be $100 million
The company expects to have a 29.926% tax rate
The change in gross property, plant & equipment (PP&E) is expected to be $200 million
The company anticipates that the change in net operating working capital (NOWC) from 2014 to 2015 will be $85 million
The company anticipates that it will grow at a constant rate of 6% in to perpetuity
Vermeil’s beta is 1.15, the current treasury yield is 3.25% and the historical return on the market is 12.598%
The company’s Total Assets are $6,558.35 million, and the company’s debt is $3,000 million
The before-tax cost of debt is 7.50%
The company has 200 million shares outstanding
Questions:
What is the value of the total company?
What is the value of the company’s equity?
What is the company worth on a per share basis?
If the company is offered $40 per share by its competitor, Destiny Airways, should the Board of Directors accept the offer? Why or why not?