Question
Derry Corporation is expected to have an EBIT of $3,800,000 next year. Increases in depreciation, the increase in net working capital, and capital spending are
Derry Corporation is expected to have an EBIT of $3,800,000 next year. Increases in depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $175,000, and $215,000, respectively. All are expected to grow at 19 percent per year for four years. The company currently has $19,500,000 in debt and 1,750,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3 percent indefinitely. The company’s WACC is 8.8 percent and the tax rate is 25 percent. What is the price per share of the company's stock?
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Essentials of Corporate Finance
Authors: Stephen Ross, Randolph Westerfield, Bradford Jordan
9th edition
978-1259277214
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