Question
Pearl Corp. is expected to have an EBIT of $3,200,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to
Pearl Corp. is expected to have an EBIT of $3,200,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $145,000, and $185,000, respectively. All are expected to grow at 16 percent per year for four years. The company currently has $16,500,000 in debt and 1,150,000 shares outstanding. At Year 5, you believe that the company's sales will be $23,760,000 and the appropriate price-sales ratio is 2.4. The companys WACC is 8.8 percent and the tax rate is 24 percent.
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