Question
Fincher Manufacturing has projected sales of $146.4 million next year. Costs are expected to be $81.7 million and net investment is expected to be $15.7
Fincher Manufacturing has projected sales of $146.4 million next year. Costs are expected to be $81.7 million and net investment is expected to be $15.7 million. Each of these values is expected to grow at 15 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 7 percent, where it is expected to remain indefinitely. There are 6.2 million shares of stock outstanding and investors require a return of 14 percent return on the companys stock. The corporate tax rate is 39 percent. a. What is your estimate of the current stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price $ b. Suppose instead that you estimate the terminal value of the company using a PE multiple. The industry PE multiple is 10. What is your new estimate of the companys stock price? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price $
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started