Sora Industries has 60 million outstanding shares, $120 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 5.0% rate beyond year four. If Sora's weighted average cost of capital is 10.0%, what is the value of 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. Return 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 estimate 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 5.0% rate beyond year four. If Sora's weighted average cost of capital is 10.0%, what is the value of Sora stock based on this information? The stock price for this case is $ . (Round to the nearest cent.) 1 Year 2 Earnings and FCF Forecast ($ million) 3 Sales 4 Growth Versus Prior Year 5 Cost of Goods Sold 6 Gross Profit 7 Selling, General, and Administrative 8 Depreciation 0 1 2 3 4 (9.0) (9.50) 433.0 468.0 516.0 547.0 574.30 8.1% 10.3% 6.0% 5.0% (313.6) (345.7) (366.5) (384.78) 154.4 170.3 180.5 189.52 (93.6) (103.2) (109.4) (114.86) (7.0) (7.5) 53.8 59.6 62.1 65.16 (13.5) (14.9) (15.5) (16.29) 7.0 7.5 9.0 9.50 12 Less: Capital Expenditures (7.7) (10.0) (9.9) (10.41) 13 Less: Increase in NWC (6.3) (8.6) (5.6) (4.91) 14 Free Cash Flow 33.38 33.55 40.10 43.055 9 EBIT 10 Less: Income Tax at 25% 11 Plus: Depreciation