Question
The Hershey Company's expected annual revenues are $8.5 billion. The firm operates at an EBIT margin of 20% and is exposed to a corporate tax
The Hershey Company's expected annual revenues are $8.5 billion. The firm operates at an EBIT margin of 20% and is exposed to a corporate tax rate of 15%. You assume that Hershey is a mature firm that will make only replacement investments going forward. The expected long-term rate of growth, therefore, equals the expected rate of inflation of 1.5%. The firm's WACC is 5%.
You also know that the firm has $5.8 billion of debt outstanding and that the (fully diluted) number of shares is 207 million.
Based on this information, compute the theoretical stock price of The Hershey Company. Are you surprised by your results?
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To calculate the theoretical stock price of The Hershey Company we can use the dividend discount mod...
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Fundamentals of Corporate Finance
Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim
6th Canadian edition
1259024962, 978-1259024962
