In the previous problem, instead of a perpetual growth rate in adjusted cash flow from assets, you decide to calculate the terminal value of the company with the price-sales ratio. You believe that Year 5 sales will be $9.5 million and the appropriate price-sales ratio is 3.5. What is your new estimate of the current share price?

Previous problem

Ward Corp. is expected to have an EBIT of $1.9 million next year. Depreciation, the increase in net working capital, and capital spending are expected to be $165,000, $85,000, and $115,000, respectively. All are expected to grow at 18 percent per year for four years. The company currently has $13 million in debt and 800,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3 percent indefinitely. The company's WACC is 8.5 percent and the tax rate is 35 percent. What is the price per share of the company's stock?