Problemlemmon has eat depreciation expense capital expenses, Ask an Expert

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Problem:

Lemmon has EAT, depreciation expense, capital expenses and debt principal payments of $4m, $.2m, $.3m, and $.5m respectively. Between the first and the second years, it has current assets of $11m and $11.4m and current debts of $5m and $5.1m respectively. Its unlevered bheta, D/E and t are 2, 60/40 and .25 respectively. The t bond rate is 2% and the risk premium is 7% Lemmon's ROE is 20%, and it plows about 30% of its profits back into its business.

Required:

Question: Derive the value of Lemmon.

Note: Provide support for your rationale.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91162245

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