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Wholefood Stores is a retail firm. In the last year (Year 0), Wholefood Stores reported $200 million in revenues, $40 million in earnings before interest,
Wholefood Stores is a retail firm. In the last year (Year 0), Wholefood Stores reported $200 million in revenues, $40 million in earnings before interest, tax, depreciation and amortisation (EBITDA). Operating working capital was $10 million during the last year. Wholefood Stores is considering cutting its dividend this year from $0.25 to $0.20 per share and use the extra funds to expand. Currently, Wholefood Store's dividends are expected to grow at a 4.5% annual rate, and its share price is $5. With the new expansion, Wholefood Stores dividends are expected to grow at a 5% annual rate. What share price would you expect if Wholefood Stores decides to pursue this expansion and makes an announcement (Assume Wholefood Stores' risk is unchanged by the new expansion)? Is the expansion adding value to the shareholders of Wholefood Stores? Wholefood Stores is a retail firm. In the last year (Year 0), Wholefood Stores reported $200 million in revenues, $40 million in earnings before interest, tax, depreciation and amortisation (EBITDA). Operating working capital was $10 million during the last year. Wholefood Stores is considering cutting its dividend this year from $0.25 to $0.20 per share and use the extra funds to expand. Currently, Wholefood Store's dividends are expected to grow at a 4.5% annual rate, and its share price is $5. With the new expansion, Wholefood Stores dividends are expected to grow at a 5% annual rate. What share price would you expect if Wholefood Stores decides to pursue this expansion and makes an announcement (Assume Wholefood Stores' risk is unchanged by the new expansion)? Is the expansion adding value to the shareholders of Wholefood Stores
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