Question
Nextbig Corp currently has sales of $870 million, sales are expected to grow by 26% next year (year 1) For the year after next (year
Nextbig Corp currently has sales of $870 million, sales are expected to grow by 26% next year (year 1) For the year after next (year 2), the growth rate in sales is expected to equal 13% Over each of the next 2 years, the company is expected to have a net profit margin of 11% and a payout ratio of 40%, and to maintain the common stock outstanding at 24.00 million shares. The stock always trades at a P/E of 15 00 times earnings, and the investor has a required rate of return of 18% Given this information:
a. Find the stock's intrinsic value (its justified price)
b. Use the IRR approach to determine the stock's expected return, given that it is currently trading at $38.00 per share c. Find the holding period returns for this stock for year 1 and for year 2
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