Megas produces giros and stuffed grape leaves. It has the following capital structure. Its debt is $200m and its equity
Posted: Thu Apr 28, 2022 1:54 pm
Megas produces giros and stuffed grape leaves. It has the
following capital structure. Its debt is $200m and its equity is
$300M. Its risk free rate is 3%, while the expected return of the
market is 10%, and its unlevered beta is 1. The corporate tax rate
is .2, and the yield to maturity of its bonds is .05. Megas intends
to invest $300 m into a giro project wanting to become the biggest
seller in the American continent. Thus, it expects to receive $75m
operating free cash flow annually for 30 years on this investment.
The depreciation is straight line for 30 years (based on the $300m
investment) and the annual interest is $25 m. For the grape leaves
project, Megas will invest $210 million and receive $55m annually,
in terms of operations free cash flow. Interest is $15 m and
depreciation is $7 m per annum. Compute the value of Megas.
following capital structure. Its debt is $200m and its equity is
$300M. Its risk free rate is 3%, while the expected return of the
market is 10%, and its unlevered beta is 1. The corporate tax rate
is .2, and the yield to maturity of its bonds is .05. Megas intends
to invest $300 m into a giro project wanting to become the biggest
seller in the American continent. Thus, it expects to receive $75m
operating free cash flow annually for 30 years on this investment.
The depreciation is straight line for 30 years (based on the $300m
investment) and the annual interest is $25 m. For the grape leaves
project, Megas will invest $210 million and receive $55m annually,
in terms of operations free cash flow. Interest is $15 m and
depreciation is $7 m per annum. Compute the value of Megas.