P 10-8 (similar to) Sora Industries has 68 million outstanding shares, $120 million in debt, S40 million in cash, and the following projected free cash flow for the next four years Question Help Year 0 1 2 3 4 Earnings and FCF Forecast (S million) 1 Sales 433.0 468.0 547.0 516.0 574.3 2 Growth vs. Prior Year 8.1 % 10.3% 6.0% 5.0% (313.6) 154.4 3 Cost of Goods Sold (345.7) 170.3 (366.5) (384.8) 189.5 4 Gross Profit 180.5 5 Selling, General, & Admin. Depreciation (93.6) (7.0) (103.2) (7.5) (109.4) (9.0) (114.9) (9.5) 65.2 6 7 EBIT 53.8 59.6 62.1 8 Less: Income Tax at 40 % 9 Plus: Depreciation (21.5) (23.8) (24.8) 9.0 (26.1) 7.0 7.5 9.5 a. Suppose Sora's revenue and free cash flow are expected to grow at a 5.9% rate beyond year four. If Sora's weighted average cost of capital is 9.0 % , what is the value of Sora stock based on this information? The stock price for this case is S (Round to the nearest cent) Homework: Chapter 10 Homework Save Score: 0.5 of 2 pts 5 of 6 (5 complete) HW Score: 50%, 4.5 of 9 P 10-8 (similar to) Question Help 7 EBIT 53.8 59.6 62.1 65.2 8 Less: Income Tax at 40 % 9 Plus: Depreciation 10 Less: Capital Expenditures 11 Less: Increase in NWC 12 Free Cash Flow (23.8) (21.5) (24.8) (26.1) 9.5 7.0 7.5 9.0 (7.7) (10.0) (8.6) (9.9) (5.6) 30.8 (10.4) (4.9) 33.3 (6.3) 25.3 24.6 a. Suppose Sora's revenue and free cash flow are expected to grow at a 5.9 % rate beyond year four. If Sora's weighted average cost of capital is 9.0 %, what is the value or Sora 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. Retun to the assumptions of part (a) and suppose Sora can maintain its cost of goods sold at 67 % of sales. However, the firm 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 (their current level in year zero). If Sora can reduce this requirement to 12 % of sales starting in year 1, but all other assumptions are as in (a). what stock price do you estmate 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 5.9 % rate beyond year four If Sora's weighted average cost of capital is 9.0 %, what is the value o Sora stock based on this infomation? The stock price for this case is $ (Round to the nearest cent)
