Sora Industries has $69$ million outstanding shares, $$129$ million in debt, $$40$ million in 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 $5\mathrm{.}4\%$ rate beyond year $4.$ If Sora's weighted average cost of

capital is $12\mathrm{.}0\%,$ 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: This change will have the largest impact on Sora's free cash flow in year $1.)$

Year $01234$

Earning & FCF Forecast $($$millions$)$

$1$ Sales $433\mathrm{.}0468\mathrm{.}0516\mathrm{.}0547\mathrm{.}0574\mathrm{.}3$

$2$ Growth versus Prior Year $(\%)8\mathrm{.}110\mathrm{.}36\mathrm{.}05\mathrm{.}0$

$3$ Cost of Goods Sold $-313\mathrm{.}6-345\mathrm{.}7-366\mathrm{.}5-384\mathrm{.}8$

$4$ Gross Profit $154\mathrm{.}4170\mathrm{.}3180\mathrm{.}5189\mathrm{.}5$

$5$ Selling, General, and Administrative $-93\mathrm{.}6-103\mathrm{.}2-109\mathrm{.}4-114\mathrm{.}9$

$6$ Depreciation $-7\mathrm{.}0-7\mathrm{.}5-9\mathrm{.}0-9\mathrm{.}5$

$7$ EBIT $53\mathrm{.}859\mathrm{.}662\mathrm{.}165\mathrm{.}2$

$8$ Less: Income tax at $40\%-21\mathrm{.}5-23\mathrm{.}8-24\mathrm{.}8-26\mathrm{.}1$

$9$ Plus: Depreciation $7\mathrm{.}07\mathrm{.}59\mathrm{.}09\mathrm{.}5$

$10$ Less: Capital Expenditures $-7\mathrm{.}7-10\mathrm{.}0-9\mathrm{.}9-10\mathrm{.}4$

$11$ Less: Increases in NWC $-6\mathrm{.}3-8\mathrm{.}6-5\mathrm{.}6-4\mathrm{.}9$

$12$ Free Cash Flow $25\mathrm{.}324\mathrm{.}630\mathrm{.}833\mathrm{.}3$