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FCF Forecast ($ million) Year 0 1 2 3 4 Sales 240 270 290 310 325.5 Growth versus Prior Year 12.5% 7.4% 6.9% 5.0% EBIT
FCF Forecast ($ million) Year 0 1 2 3 4 Sales 240 270 290 310 325.5 Growth versus Prior Year 12.5% 7.4% 6.9% 5.0% EBIT (10% of Sales) 27.00 29.00 31.00 32.55 Less: Income Tax (37%) (9.99) (10.73) (11.47) (12.44) Less Increase in NWC (12% of Change in Sales) 3.6 2.4 2.4 1.86 Free Cash Flow 13.41 15.87 17.13 18.65 Banco Industries expect sales to grow at a rapid rate over the next 3 years but settle to an industry growth rate of 5% in year 4. The spreadsheet above shows a simplified pro forma for Banco Industries. Banco Industries has a weighted average cost of capital of 11%, $40 million in cash, $70 million in debt, and 18 million shares outstanding. If Banco Industries can reduce its operating expenses so that EBIT becomes 12% of sales, by how much will its stock price increase? Show calculations
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