Sora Industries has 66 million outstanding shares, $128 million in debt, $44 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 4.3% 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.)

Sora Industries has 66 million outstanding shares, $128 million in debt, $44 million in cash, and the following projected free cash flow for the next four years Year Earnings and FCF Forecast (S million) 4 1 Sales 2 Growth vs. Prior Year 3 Cost of Goods Sold 4 Gross Profit 5 Selling, General, & Admin 6 Depreciation 7 EBIT 8 Less: Income Tax at 40% 9 Plus: Depreciation 574.3 5.0% (313.6) 345.7) (366.5) (384.8) 189.5 (93.6) (103.2 (109.4) (114.9) (9.5) 65.2 468.0 8.1% 516.0 10.3% 547.0 6,0% 433.0 154.4 170.3 180.5 (7.0) (7.5)(9.0) 62.1 (21.5) (23.8 (24.8) 9.0 53.8 59.6 7.0 7.5 9.5