Sora Industries has $60$ million outstanding shares, $$120$ million in debt, $$44$ million ia$.$ Suppose Sora$$s revenue and free cash flow are expected to grow at a $5\mathrm{.}5\%$ rate beyond year $4.$

If Sora$$s weighted average cost of capital is $10\%,$ what is the value of Sora$$s 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 actu$-$

ally $70\%$ of sales, how would the estimate of the stock$$s value change?

c$.$ Let$$s return to the assumptions of part $($a$)$ and suppose Sora can maintain its cost of goods

sold at $67\%$ of sales. However, now suppose Sora reduces its selling, general, and administra$-$

tive 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 $($which is their current

level in year $0).$ If Sora can reduce this requirement to $12\%$ of sales starting in year $1,$ but all

other assumptions remain as in part $($a$),$ what stock price do you estimate for Sora? $($Hint:

This change will have the largest impact on Sora$$s free cash flow in year $1.)$

n cash, and the following projected free cash flow for the next four years:

a$.$ Suppose Sora$$s revenue and free cash flow are expected to grow at a $5\mathrm{.}5\%$ rate beyond year $4.$ If Sora$$s weighted average cost of capital is $10\%,$ what is the value of Sora$$s 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$.$ Let$$s return to the assumptions of part $($a$)$ and suppose Sora can maintain its cost of goods sold at $67\%$ of sales. However, now suppose Sora 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$$s net working capital needs were estimated to be $18\%$ of sales $($which is their current level in year $0).$ If Sora can reduce this requirement to $12\%$ of sales starting in year $1,$ but all other assumptions remain as in part $($a$),$ what stock price do you estimate for Sora? $($Hint: Sora Industries has $60$ million outstanding shares, $$120$ million in debt, $$44$ million in cash, and

the following projected free cash flow for the next four years:This change will have the largest impact on Sora$$s free cash flow in year $1.)$