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Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Sora Industries has 66 million outstanding shares, $121 million
Data table (Click on the following icon in order to copy its contents into a spreadsheet.) Sora Industries has 66 million outstanding shares, $121 million in debt, $58 million in cash, and the following projected free cash flow for the next four years: a. Suppose Sorabenue and free cash flow are expected to grow at a 3.7% rate beyond year four. If Soralseighted average cost of capital is 12.0% what is the value of Sorastock based on this information? b. Soratsost of goods sold was assumed to be 67% of sales. If its cost of goods sold is actually 70% of sales, how would the estimate of the stock's value change? c. Return to the assumptions of part (a) and suppose Soracan maintain its cost of goods sold at 67% of sales. However, the firm reduces its selling, general, and administrative expenses from 20% of sales to 16% of sales. What stock price would you estimate now? (Assume no other expenses, except taxes, are affected.) d. Soralset working capital needs were estimated to be 18% of sales (their current level in year zero). If Soracan reduce this requirement to 12% of sales starting in year 1 , but all other assumptions are as in (a), what stock price do you estimate for Sora(flint: This change will have the largest impact on Sorafsee cash flow in year 1.)
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