Derry Corporation is expected to have an EBIT of $2,600,000 next year. Increases in depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $115,000, and $155,000, respectively. All are expected to grow at 16 percent per year for four years. The company currently has $13,500,000 in debt and 1,150,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3 percent indefinitely. The company's WACC is 9.2 percent and the tax rate is 23 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. Share price $ 41.86 X
Derry Corporation is expected to have an EBIT of $2,600,000 next year. Increases in depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $115,000, and $155,000, respectively. All are expected to grow at 16 percent per year for four years. The company currently has $13,500,000 in debt and 1,150,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3 percent indefinitely. The company's WACC is 9.2 percent and the tax rate is 23 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Answer is complete but not entirely correct. Share price $ 41.86 X
Chapter4: Financial Planning And Forecasting
Section: Chapter Questions
Problem 9P
Related questions
Question
![Derry Corporation is expected to have an EBIT of $2,600,000 next year. Increases in
depreciation, the increase in net working capital, and capital spending are expected to
be $160,000, $115,000, and $155,000, respectively. All are expected to grow at 16
percent per year for four years. The company currently has $13,500,000 in debt and
1,150,000 shares outstanding. After Year 5, the adjusted cash flow from assets is
expected to grow at 3 percent indefinitely. The company's WACC is 9.2 percent and the
tax rate is 23 percent. What is the price per share of the company's stock? (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer is complete but not entirely correct.
Share price
$ 41.86](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff48cfe57-a6bf-448b-8232-a40099d012f1%2F7043deaf-ad98-492c-9f49-199287d91ed7%2Foxtw3gi_processed.png&w=3840&q=75)
Transcribed Image Text:Derry Corporation is expected to have an EBIT of $2,600,000 next year. Increases in
depreciation, the increase in net working capital, and capital spending are expected to
be $160,000, $115,000, and $155,000, respectively. All are expected to grow at 16
percent per year for four years. The company currently has $13,500,000 in debt and
1,150,000 shares outstanding. After Year 5, the adjusted cash flow from assets is
expected to grow at 3 percent indefinitely. The company's WACC is 9.2 percent and the
tax rate is 23 percent. What is the price per share of the company's stock? (Do not round
intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Answer is complete but not entirely correct.
Share price
$ 41.86
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