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 $ 100million in cash,$ 3million in debt,21million 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? That is:

	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 $ 25.70to $ 24.83.

B.

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

C.

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

D.

The range of share prices consistent with these forecasts is from $ 28.34to $ 22.24.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)?(Select the best choice below.)

A.

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

B.

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

C.

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

D.

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

B.

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

C.

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

D.

The range of share prices consistent with these forecasts is from $ 28.34to $ 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 $ 19.59to $ 27.48.

B.

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

C.

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

D.

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