10.

You are valuing Soda City Inc. It has $150 million of debt, $70 million of cash, and 200 million shares outstanding. You estimate its cost of capital is 8.0%. You forecast that it will generate revenues of $740 million and $760 million over the next two years, after which it will grow at a stable rate in perpetuity. Projected operating profit margin is 40%, tax rate is 20%, reinvestment rate is 60%, and terminal EV/FCFF exit multiple at the end of year 2 is 8. What is your estimate of its share price? Round to one decimal place.

HintFirst, compute projected FCFF for years 1 and 2 using revenues, operating profit margin, tax rate, and reinvestment rate. Then compute terminal value using the exit multiple method, discount all FCFFs and TV to find EV, finally walk the bridge to the stock price.