Given the Forecast Below,estimate the Fair Market Value of Kenmore

question 15

Essay

Given the forecast below,estimate the fair market value of Kenmore Air's equity per share at the end of 2012 under the following assumptions:
• EBIT in year 2016 is $210 million,and then grows at 4 percent per year forever.• To support the perpetual growth in EBIT,capital expenditures in year 2017 exceed depreciation by $25 million,and this difference grows 4 percent per year forever.• Similarly,working capital investments are $10 million in 2017,and this amount grows 4 percent per year forever.• Kenmore Air's weighted-average cost of capital is 11 percent and its tax rate is 40 percent.• Kenmore Air has 50 million shares outstanding and the market value of its interest-bearing liabilities on the valuation date equals $300 million.

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Definitions:

Austria-Hungary

A central European empire existing from 1867 to 1918, it was a dual monarchy consisting of Austria and Hungary, which dissolved after its defeat in World War I.

Habsburg Lands

The Habsburg Lands refer to the territories ruled by the Habsburg dynasty, including parts of modern-day Austria, Hungary, and others, known for their complex multi-ethnic composition and significant role in European history.

Neo-absolutism

Neo-absolutism, also known as neo-absolutist, refers to the 19th-century political trend in certain European monarchies to reinforce absolute monarchy powers amidst modernizing reforms.

Liberals and Nationalists

Advocates for liberal policies favoring freedom, democracy, and equality, and nationalists who emphasize strong national identity and sovereignty, often working together in 19th-century European movements for independence and reform.