Homework: Hom... HW Score: 37.36%, 34 of 91 points O Points: 0 of 4 Sav Year 0 2 3 Earnings and FCF Forecast (5 million) 1 Sales 433.0 468.0 516.0 5470 574.3 2 Growth vs. Prior Year 8.1% 10.3% 6.0% 5.0% 3 Cost of Goods Sold (313.6) (345.7) (366.5) (384.8) 4 Gross Profit 1544 170.3 180.5 189.5 5 Seling, General, & Admin (93,6) (1032) (109.4) (1149) 6 Depreciation (7.0) (7.5) (9.0) (9.5) 7 EBIT 53.8 59.6 62.1 65.2 8 Less: Income Tax at 40% (21.5) (23.8) (248) (26.1) 9 Plus: Depreciation 7.0 7.5 9.0 9.5 10 Less: Capital Expenditures (7.7) (10,0) (9.9) (104 11 Less: Increase in NWC (6.3) (8.6) (5.6) (4.9) 12 Free Cash Flow 25.3 24.6 30.8 33.3 a. Suppose Sota's revenue and free cash flow are expected to grow at a 5.8% rate beyond year four. If Sora's weighted average cost of capital de 13.0%, what is value of Sora stock based on this information? b. Sora's cost of goods sold was assumed to be 67% of sales. If its cost of goods sold is actually 70% of sales, how would the estimate of the stock's value change c. Return to the assumptions of part (a) and suppose Sora can maintain its cost of goods sold at 67% of sales. However, the firm reduces its selling general and administrative expenses from 20% of sales to 16% of sales. What stock price would you stimato now? (Assume no other expenses, except taxes, are affected) d. Sora's not working capital needs were estimated to be 18% of sales their current level in year zero). If Sora can reduce this requirement to 12% of sales startin year 1. but all other assumptions are as in (a) what stock price do you estimate for Sora? (Hint. This change will have the largest impact on Sou's tree cash flow in vear 1.3 a. Suppose Sora's revenue and free canh flow are expected to grow at a 5,8% rato beyond year four. Il Sona's weighted average cost of capital in 13.0%. What is the Part 1 of 4 Points: 0 of 4 Sora Industries has 63 million outstanding shares. $124 million in debt, $50 million in cash, and the following projected free cash flow for the next four years: Year 0 1 2 3 Earnings and FCF Forecast (5 million) Gal Homework: Hom... HW Score: 37.36%, 34 of 91 points O Points: 0 of 4 Sav Year 0 2 3 Earnings and FCF Forecast (5 million) 1 Sales 433.0 468.0 516.0 5470 574.3 2 Growth vs. Prior Year 8.1% 10.3% 6.0% 5.0% 3 Cost of Goods Sold (313.6) (345.7) (366.5) (384.8) 4 Gross Profit 1544 170.3 180.5 189.5 5 Seling, General, & Admin (93,6) (1032) (109.4) (1149) 6 Depreciation (7.0) (7.5) (9.0) (9.5) 7 EBIT 53.8 59.6 62.1 65.2 8 Less: Income Tax at 40% (21.5) (23.8) (248) (26.1) 9 Plus: Depreciation 7.0 7.5 9.0 9.5 10 Less: Capital Expenditures (7.7) (10,0) (9.9) (104 11 Less: Increase in NWC (6.3) (8.6) (5.6) (4.9) 12 Free Cash Flow 25.3 24.6 30.8 33.3 a. Suppose Sota's revenue and free cash flow are expected to grow at a 5.8% rate beyond year four. If Sora's weighted average cost of capital de 13.0%, what is value of Sora stock based on this information? b. Sora's cost of goods sold was assumed to be 67% of sales. If its cost of goods sold is actually 70% of sales, how would the estimate of the stock's value change c. Return to the assumptions of part (a) and suppose Sora can maintain its cost of goods sold at 67% of sales. However, the firm reduces its selling general and administrative expenses from 20% of sales to 16% of sales. What stock price would you stimato now? (Assume no other expenses, except taxes, are affected) d. Sora's not working capital needs were estimated to be 18% of sales their current level in year zero). If Sora can reduce this requirement to 12% of sales startin year 1. but all other assumptions are as in (a) what stock price do you estimate for Sora? (Hint. This change will have the largest impact on Sou's tree cash flow in vear 1.3 a. Suppose Sora's revenue and free canh flow are expected to grow at a 5,8% rato beyond year four. Il Sona's weighted average cost of capital in 13.0%. What is the Part 1 of 4 Points: 0 of 4 Sora Industries has 63 million outstanding shares. $124 million in debt, $50 million in cash, and the following projected free cash flow for the next four years: Year 0 1 2 3 Earnings and FCF Forecast (5 million) Gal