Derry Corporation is expected to have an EBIT of $2,700,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $205,000, $110,000, and $210,000, respectively. All are expected to grow at 19 percent per year for four years. The company currently has $15,500,000 in debt and 820,000 shares outstanding. At Year 5, you believe that the company's sales will be $27,900,000 and the appropriate price-sales ratio is 2.6. The company's WACC is 8.8 percent and the tax rate is 25 percent. What is the price per share of the company's stock? Please use a spread sheet and answer what the share price is.
Derry Corporation is expected to have an EBIT of $2,700,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $205,000, $110,000, and $210,000, respectively. All are expected to grow at 19 percent per year for four years. The company currently has $15,500,000 in debt and 820,000 shares outstanding. At Year 5, you believe that the company's sales will be $27,900,000 and the appropriate price-sales ratio is 2.6. The company's WACC is 8.8 percent and the tax rate is 25 percent. What is the price per share of the company's stock? Please use a spread sheet and answer what the share price is.
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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Transcribed Image Text:Derry Corporation is expected to have an EBIT of $2,700,000 next year.
Depreciation, the increase in net working capital, and capital spending are
expected to be $205,000, $110,000, and $210,000, respectively. All are
expected to grow at 19 percent per year for four years. The company
currently has $15,500,000 in debt and 820,000 shares outstanding. At
Year 5, you believe that the company's sales will be $27,900,000 and the
appropriate price-sales ratio is 2.6. The company's WACC is 8.8 percent
and the tax rate is 25 percent.
What is the price per share of the company's stock? Please use a spread
sheet and answer what the share price is.
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