Question
Determine the intrinsic stock price of a firm using the following assumptions. The forecast period is five years. At the end of five years, you
Determine the intrinsic stock price of a firm using the following assumptions. The forecast period is five years. At the end of five years, you should calculate a residual value using the growth perpetuity method.
Sales (last historical period) | $67,420 million |
Sales growth rate (%) | 10.0 |
COGS (% of sales) | 72.0 |
SG&A (% of sales) | 22.75 |
Depreciation (% of sales) | 1.5 ** |
Cash income tax rate | 37.0% |
Capital expenditures (% of sales) | 2.75 |
Net working capital (last historical period) | $2,480 million |
Inventory Turnover (COGS) | 6.6x |
Ave. Collection Period (360) | 13.5 days |
Days Payable Outstanding (360) | 34 days |
Accruals (% of sales) | 4.0 |
Long-term FCF growth rate (%) | 5.0 |
Cost of capital (%) | 8.75 |
**Depreciation expense is already included in COGS and/or SG&A. Note: For this firm, net working capital should be calculated as accounts receivable plus inventory minus (accounts payable + accruals). Assume the firm has $4,454 million debt outstanding and no surplus cash. If the firm has 938.6 million shares outstanding, what is the intrinsic share price?
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