Kenneth Cole (KCP) had sales of $518.0 million in 2005. Based on KCP's past profitability and investment needs, you expect EBIT to be 9% of sales, increases in net working capital requirements to be 10 % of any increase in sales, and net investment (capital expenditures in excess of depreciation) to be 8% of any increase in sales. KCP has $100 million in cash, $3 million in debt, 21 million shares outstanding, a tax rate of 37%, and a weighted average cost of capital of 11%.

a. Suppose you believe KCP's initial revenue growth rate will be between 4% and 11%* (*with growth slowing in equal steps to 4% by year 2011). What range of share prices for KCP is consistent with these forecasts?

b. Suppose you believe KCP's EBIT margin will be between 7% and 10% of sales. What range of share prices for KCP is consistent with these forecasts (keeping KCP's initial revenue growth at 9% with growth slowing in equal steps to 4% by year 2011)?

c. Suppose you believe KCP's weighted average cost of capital is between 10% and 12%. What range of share prices for KCP is consistent with these forecasts (keeping KCP's initial revenue growth and EBIT margin at 9% with growth slowing in equal steps to 4% by year 2011)?

d. What range of share prices is consistent if you vary the estimates as in parts (a), (b), and (c) simultaneously?

Case 1 Case 2 Revenue growth rate 4% 11%* EBIT margin 7% 10% WACC 10% 12 %

(A) Suppose you believe KCP's initial revenue growth rate will be between 4% and 11% (with growth slowing in equal steps to 4% by year 2011). What range of share prices for KCP is consistent with these forecasts? (Select the best choice below.)

A. The range of share prices consistent with these forecasts is from $ 20.51 to $ 25.36.

B.The range of share prices consistent with these forecasts is from $ 28.34$ to $ 22.24$.

C. The range of share prices consistent with these forecasts is from $ 19.59 to $ 27.48.

D.The range of share prices consistent with these forecasts is from $ 25.70 to $ 24.83.

(B). (Part 2 - Select the correct Answer)

Suppose you believe KCP's EBIT margin will be between 7% and 10% of sales. What range of share prices for KCP is consistent with these forecasts (keeping KCP's initial revenue growth at 9% with growth slowing in equal steps to 4% by year 2011)?(Select the best choice below.)

A.The range of share prices consistent with these forecasts is from $20.51 to $25.36.

B.The range of share prices consistent with these forecasts is from $28.34 to $ 22.24.

C. The range of share prices consistent with these forecasts is from $25.70 to $24.83.

D.The range of share prices consistent with these forecasts is from $19.59 to $27.48.

(C). (Part 2 - Select the correct Answer)

(C) Suppose you believe KCP's weighted average cost of capital is between 10% and 12%. What range of share prices for KCP is consistent with these forecasts (keeping KCP's initial revenue growth and EBIT margin at 9% with growth slowing in equal steps to 4% by year 2011)? (Select the best choice below.)

A.The range of share prices consistent with these forecasts is from $ 20.51 to $ 25.36.

B.The range of share prices consistent with these forecasts is from $ 19.59 to $ 27.48.

C.The range of share prices consistent with these forecasts is from $ 25.70 to $ 24.83.

D.The range of share prices consistent with these forecasts is from $ 28.34 to $ 22.24.

(D.) What range of share prices is consistent if you vary the estimates as in parts (a), (b), and (c) simultaneously? That is: Case 1 Case 2 Revenue growth rate 4% 11%* EBIT margin 7% 10% WACC 10% 12 % (Select the best choice below.)

A.The range of share prices consistent with these forecasts is from $ 20.51 to $ 25.36.

B.The range of share prices consistent with these forecasts is from $ 25.70 to $$24.83.

C.The range of share prices consistent with these forecasts is from $19.59 to $27.48.

D.The range of share prices consistent with these forecasts is from $ 28.34 to $22.24.