Sora Industries has 67 million outstanding shares, $122 million in debt, $51 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 3.1% rate beyond year 4 . If Sora's weighted average cost of capital is 11.0%, 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 car 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. .) a. Suppose Sora's revenue and free cash flow are expected to grow at a 3.1% rate beyond year 4 . If Sora's weighted average cost of capital is 11.0%, what is the value of Sora's stock based on this information? The stock price for this case is $. (Round to two decimal places.) Sora Industries has 67 million outstanding shares, $122 million in debt, $51 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 3.1% rate beyond year 4 . If Sora's weighted average cost of capital is 11.0%, 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 car 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. .) a. Suppose Sora's revenue and free cash flow are expected to grow at a 3.1% rate beyond year 4 . If Sora's weighted average cost of capital is 11.0%, what is the value of Sora's stock based on this information? The stock price for this case is $. (Round to two decimal places.)
