Lansing Corporation Reported Net Income of $65 Million for Last

question 66

Multiple Choice

Lansing Corporation reported net income of $65 million for last year. Depreciation expense totaled $15 million and capital expenditures came to $6 million. Free cash flow is expected to grow at a rate of 4.5 percent for the foreseeable future. Lansing faces a 21 percent tax rate and has a .35 debt to equity ratio with $260 million (market value) in debt outstanding. Lansing's equity beta is 1.35, the risk-free rate is currently 5 percent, and the market risk premium is estimated to be 6.5 percent. What is the current total value of Lansing's equity (in millions) ? (Assume Lansing had no interest expense for the year.)

• A)$655.90
• B)$788.65
• C)$840.61
• D)$951.26
• E)$1,025.95

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Definitions:

Differential Stress

Stress applied to a rock body in different directions, leading to deformation like folding, faulting, or flowing.

Confining Pressure

The pressure applied equally in all directions on a rock or sediment layer, often increasing with depth in the Earth's crust.

Fluid Pressure

The pressure exerted by a fluid at equilibrium at any given point within the fluid, due to the force of gravity.

Columnar Joints

A geological feature where certain types of volcanic or igneous rock cool and shrink, forming vertical, polygonal columns of rock.