Answered step by step
Verified Expert Solution
Question
1 Approved Answer
15 Derry Corp. is expected to have an EBIT of $2.1 million next year. Increases in depreciation, the increase in net working capital, and capital
15
Derry Corp. is expected to have an EBIT of $2.1 million next year. Increases in depreciation, the increase in net working capital, and capital spending are expected to be $165,000,$80,000, and $120,000, respectively. All are expected to grow at 18 percent per year for four years. The company currently has $10.4 million in debt and 750,000 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 21 percent. What is the price per share of the company's stock? EBITDepreciationChangeinNWCCapitalspendingIncreaseperyearEBITDepreciationChangeinNWCCapitalspendingValueofdebtSharesoutstandingTerminalgrowthrateWACCTaxrate$2,100,000$165,000$80,000$120,00018%18%18%18%$10,400,000750,0003%8.50%21%Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started