Use the table for the question below.

FCF Forecast ($ million)

Year 0 1 2 3 4

Sales 240 270 290 310 325.5

Growth versus Prior Year 12.5% 7.4% 6.9% 5.0%

EBIT (10% of Sales) 27.00 29.00 31.00 32.55

Less: Income Tax (37%) (9.99) (10.73) (11.47) (12.44)

Less Increase in NWC 3.6 2.4 2.4 1.86

(12% of Change in Sales)

Free Cash Flow 13.41 15.87 17.13 18.65

Banco Industries expect sales to grow at a rapid rate over the next 3 years, but settle to an industry growth rate of 7% in year 4. The spreadsheet above shows a simplified pro forma for Banco Industries. Banco industries has a weighted average cost of capital of 12%, $40 million in cash, $80 million in debt, and 18 million shares outstanding. If Banco Industries can reduce its operating expenses so that EBIT becomes 12% of sales, by how much will its stock price increase?

I know the answer to this question is $3.73. I just need the solution. Thanks in advance.