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Sora industries has 68 million outstanding shares, $125 million in debt, $60 million in cash, and the following projected free cash flow for the next
Sora industries has 68 million outstanding shares, $125 million in debt, $60 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 3.7% rate beyond year 4. If Sora's weighted average cost of capital is 12.0%, 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 6.7% 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.)
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