Question
) You have estimated the following information for a firm (in M): Y1 Y2 Sales 300 350 Operating Expenses 120 140 Depreciation Expense 20 30
) You have estimated the following information for a firm (in M):
|
| Y1 | Y2 |
| Sales | 300 | 350 |
| Operating Expenses | 120 | 140 |
| Depreciation Expense | 20 | 30 |
| Cap Ex | 10 | 40 |
| Increase NOWC | 5 | 10 |
You expect free cash flows to grow by 4% after year 2. The weighted average cost of capital is estimated at 12%. They have cash of $15 million and debt of 25 million. Tax rate is 25%.
a. Estimate the share price if there are 40M shares issued and outstanding.
b. If the stock currently trades at $25 per share, what is your recommendation? Explain.
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
