Question
Derry Corporation is expected to have an EBIT of $125,000,000 next year. Increases in depreciation, the increase in net working capital, and capital spending are
Derry Corporation is expected to have an EBIT of $125,000,000 next year. Increases in depreciation, the increase in net working capital, and capital spending are expected to be $125,000, $125,000, and $225,000, respectively. All are expected to grow at 12.5 percent per year for four years. The company currently has $125,000,000 in debt and 190,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 4 percent indefinitely. The companys WACC is 15 percent and the tax rate is 35%. What is the price per share of the company's stock. Please show full working.
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