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28. Stock Valuation and Cash Flows million next year. Costs are expected to be $67 million and net investment is expected to be $12 million. Each of these values is expected to grow at 14 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 6 per- cent, where it is expected to remain indefinitely. There are 5.5 million shares of stock outstanding and investors require a return of 13 percent on the company's stock. The corporate tax rate is 21 percent. Full Boat Manufacturing has projected sales of $115 a. What is your estimate of the current stock price? b. Suppose instead that you estimate the terminal value of the company using a PE mul- tiple. The industry PE multiple is 11. What is your new estimate of the company's

28. Stock Valuation and Cash Flows million next year. Costs are expected to be $67 million and net investment is expected to be $12 million. Each of these values is expected to grow at 14 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 6 per- cent, where it is expected to remain indefinitely. There are 5.5 million shares of stock outstanding and investors require a return of 13 percent on the company's stock. The corporate tax rate is 21 percent. Full Boat Manufacturing has projected sales of $115 a. What is your estimate of the current stock price? b. Suppose instead that you estimate the terminal value of the company using a PE mul- tiple. The industry PE multiple is 11. What is your new estimate of the company's

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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28. Stock Valuation and Cash Flows million next year. Costs are expected to be $67 million and net investment is expected to be $12 million. Each of these values is expected to grow at 14 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 6 per- cent, where it is expected to remain indefinitely. There are 5.5 million shares of stock outstanding and investors require a return of 13 percent on the company's stock. The corporate tax rate is 21 percent. Full Boat Manufacturing has projected sales of $115 a. What is your estimate of the current stock price? b. Suppose instead that you estimate the terminal value of the company using a PE mul- tiple. The industry PE multiple is 11. What is your new estimate of the company's stock price? difforont stocks all of which have a required
Transcribed Image Text:28. Stock Valuation and Cash Flows million next year. Costs are expected to be $67 million and net investment is expected to be $12 million. Each of these values is expected to grow at 14 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 6 per- cent, where it is expected to remain indefinitely. There are 5.5 million shares of stock outstanding and investors require a return of 13 percent on the company's stock. The corporate tax rate is 21 percent. Full Boat Manufacturing has projected sales of $115 a. What is your estimate of the current stock price? b. Suppose instead that you estimate the terminal value of the company using a PE mul- tiple. The industry PE multiple is 11. What is your new estimate of the company's stock price? difforont stocks all of which have a required
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