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i need help with all parts of this question, parts A-D. Thank you for the help X i Data Table 3 (Click on the Icon
i need help with all parts of this question, parts A-D.
Thank you for the help
X i Data Table 3 (Click on the Icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Year 0 1 2 4 Earnings & FCF Forecast (5 million) 1 Sales 433.0 468.0 516.0 547.0 574.3 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 154.4 170.3 180.5 189.5 5 Selling, General & Admin. (93.6) (103.2) (109.4) (114.9) 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) (24.8) (26.1) 9 Plus: Depreciation 7.0 7.5 9.0 10 Less: Capital Expenditures (7.7) (10.0) (9.9) (10.4) 11 Less: Increases in NWC (6.3) (5.6) (4.9) 12 Free Cash Flow 25.3 24.6 30.8 33.3 9.5 (8.6) Print Done Sora Industries has 64 million outstanding shares, $130 million in debt, $58 million in cash, and the following projected free cash flow for the next four years : a. Suppose Sora's revenue and free cash flow are expected to grow at a 5.6% rate beyond year 4. If Sora's weighted average cost of capital is 12.0%, what is the value of Sora's 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. Let's return to the assumptions of part (a) and suppose Sora can maintain its cost of goods sold at 67% of sales. However, now suppose Sora reduces its selling, general, and administrative expenses from 20% of sales to 16% of sales. What stock price would you estimate now? (Assume no other expenses, except taxes, are affected.) d. Sora's net working capital needs were estimated to be 18% of sales (which is their current level in year 0). If Sora can reduce this requirement to 12% of sales starting in year 1, but all other assumptions remain as in part (a), what stock price do you estimate for Sora? (Hint. This change will have the largest impact on Sora's free cash flow in year 1.) a. Suppose Sora's revenue and free cash flow are expected to grow at a 5.6% rate beyond year 4. If Sora's weighted average cost of capital is 12.0%, what is the value of Sora's stock based on this information? The stock price for this case is $ (Round to two decimal places.)Step by Step Solution
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