Sora Industries has 65 million outstanding shares, $122 million in debt, $60 million in cash, and the following projected free cash flow for the next four years: Year Earnings and FCF Forecast ($ million) 433.0 574.3 5.0% (313.6) (345.7) (366.5) (384.8) 468.0 1 Sales 2 Growth vs. Prior Year 3 Cost of Goods Sold 516.0 10.3% 547.0 6.0% 8.1% 154.4 (7.0) Gross Profit 5 Selling, General, & Admin 6 Depreciation 7 EBIT 8 Less: Income Tax at 40% 9 Plus: Depreciation 189.5 (93.6) (103.2) 109.4) (114.9) 170.3 180.5 (7.5) (9.0) (9.5) 59.6 53.8 7.0 (6.3) 62.1 9.0 (5.6) 65.2 (21.5) 23.8) (24.8 7.5 9.5 (7.7) 10.0(9.9)(10.4) (4.9) 33.3 10 Less: Capital Expenditures (8.6) 24.6 11 Less: Increase in NWC 12 Free Cash Flow 25.3 30.8 a. Suppose Sora's revenue and free cash flow are expected to grow at a 3.1% rate beyond year four. If Sora's weighted average cost of capital is 13.0%, 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.)