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You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn has a reported equity beta of 1.5, a debt-to-equity ratio of .5, and a tax rate of 40 percent. Assume a risk-free rate of 5 percent and a market risk premium of 8 percent. Lauryn’s Doll Co. had EBIT last year of $47 million, which is net of a depreciation expense of $4.7 million. In addition, Lauryn made $7.25 million in capital expenditures and increased net working capital by $2.8 million. Assume her FCF is expected to grow at a rate of 4 percent into perpetuity. What is the value of the firm?

Financial Management, Finance

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