Question
The current (year 0) financial statements for CanoeBrook Builders shows the following information: EBIT = $2.95 mil. Depreciation, the increase in net working capital and
The current (year 0) financial statements for CanoeBrook Builders shows the following information: EBIT = $2.95 mil. Depreciation, the increase in net working capital and capital spending were $235,000, $105,000 and $475,000 respectively. You expect that over the next five years EBIT will grow 15% per year, depreciation and capital spending will grow at 20% per year and NWC will grow at 10% per year. The company has $19.5 mil in debt and 400,000 shares outstanding. After 5 years, the firm is expected to grow at 3.5% per year in perpetuity. The companys WACC is 9.25% and the tax rate = 35%. What is the current share price? Hint: use excel to first calculate the cash flows during years 1thru 5.
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