Sora Industries has 64 million outstanding shares, $123 million in debt, $59 million in cash, and the following projected free cash flow for the next four years: a. Suppose Sora's revenue and free cash flow are expected to grow at a 5.7% rate beyond year 4. If Sora's weighted average cost of capital is 14.0%, what is the value of Sora's stock based on this information? b. Sora's cost of goods sold was assumed to be 67% of sales. If its cost of goods sold is actually 70% of sales, how would the estimate of the stock's value change? c. Let's return to the assumptions of part (a) and suppose Sora can maintain its cost of goods sold at 67% of sales. However, now suppose Sora reduces its selling, general, and administrative expenses from 20% of sales to 16% of sales. What stock price would you estimate now? (Assume no other expenses, except taxes, are affected.) d. Sora's net working capital needs were estimated to be 18% of sales (which is their current level in year 0). If Sora can reduce this requirement to 12% of sales starting in year 1, but all other assumptions remain as in part (a), what stock price do you estimate for Sora? (Hint: This change will have the largest impact on Sora's free cash flow in year 1.) (Click on the following icon in order to copy its contents into a spreadsheet.) Year 0 1 2 3 Earnings & FCF Forecast ($ million) Sales 433.0 468.0 516.0 547.0 2 Growth vs. Prior Year 8.1% 10.3% 6.0% 3 Cost of Goods Sold (313.6) (345.7) (366.5) 4 Gross Profit 154.4 170.3 180.5 5 Selling, General & Admin. (93.6) (103.2) (109.4) 6 Depreciation (7.0) (7.5) (9.0) 7 EBIT 53.8 59.6 62.1 8 Less: Income tax at 40% (21.5) (23.8) (24.8) 9 Plus: Depreciation 7.0 7.5 9.0 10 Less: Capital Expenditures (7.7) (10.0) (9.9) 11 Less: Increases in NWC (6.3) (8.6) (5.6) 12 Free Cash Flow 25.3 24.6 30.8 4 574.3 5.0% (384.8) 189.5 (114.9) (9.5) 65.2 (26.1) 9.5 (10.4) (4.9) 33.3