Question
Johnson Biotech has projected sales of $145 million next year. Costs are expected to be $81 million and net investment, including net working capital and
Johnson Biotech has projected sales of $145 million next year. Costs are expected to be $81 million and net investment, including net working capital and capital spending less depreciation, is expected to be $15 million. Each of these values is expected to grow at 14 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 6 percent, where it is expected to remain indefinitely. There are 5.5 million shares of stock outstanding and investors require a return of 13 percent on the company's stock. The corporate tax rate is 40 percent. What is your estimate of the current stock price?
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