You have been asked to value Industries, a sports equipment manufacturer and have come up with the following inputs.

Base Year Information (2016)

• Earnings before interest and taxes in 20X0 =$600 million
• Capital expenditures in 20X0 = $120 million
• Depreciation in 20X0 = $100 million
• Revenues in 20X0 = $6,000 million
• Working capital as percent of revenues = 20%
• Tax rate = 40%

High-Growth Phase

• Length of high-growth phase = 5 years
• Expected growth rate in FCFF=15%
• Beta = 1.30
• Cost of debt = 8% (pre-tax)
• Debt ratio = 30%
• Risk-free rate = 7%
• Market Risk Premium (MRP) = 6%

Stable-Growth Phase

• Expected growth rate in FCFF= 3%

• Beta = 1.5
• Cost of debt =7% (pre-tax)
• Debt ratio = 25%
• Risk-free rate = 7%
• Market Risk Premium (MRP) = 6%

Required:

1. Suppose the Industries has 200 million outstanding shares and $1 billion in debt, what is the value of the Industries stock based on this information?