Derry Corporation is expected to have an EBIT of $2,750,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $210,000, $115,000, and $215,000, respectively. All are expected to grow at 20 percent per year for four years. The company currently has $16,000,000 in debt and 825,000 shares outstanding. At Year 5, you believe that the company's sales will be $28,000,000 and the appropriate price-sales ratio is 2.6. The company's WACC is 8.9 percent and the tax rate is 21 percent. What is the price per share of the company's stock? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Share price
Derry Corporation is expected to have an EBIT of $2,750,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $210,000, $115,000, and $215,000, respectively. All are expected to grow at 20 percent per year for four years. The company currently has $16,000,000 in debt and 825,000 shares outstanding. At Year 5, you believe that the company's sales will be $28,000,000 and the appropriate price-sales ratio is 2.6. The company's WACC is 8.9 percent and the tax rate is 21 percent. What is the price per share of the company's stock? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. Share price
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
Problem 1PS
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![Derry Corporation is expected to have an EBIT of $2,750,000 next year. Depreciation, the
increase in net working capital, and capital spending are expected to be $210,000, $115,000,
and $215,000, respectively. All are expected to grow at 20 percent per year for four years.
The company currently has $16,000,000 in debt and 825,000 shares outstanding. At Year 5,
you believe that the company's sales will be $28,000,000 and the appropriate price-sales
ratio is 2.6. The company's WACC is 8.9 percent and the tax rate is 21 percent. What is the
price per share of the company's stock?
Note: Do not round intermediate calculations and round your answer to 2 decimal places,
e.g., 32.16.
Share price](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F86ddbb0a-75ab-4b3d-820a-8be9d7b28c7b%2F97f13f08-2e63-450c-8e86-b2e68fd24034%2Fm0ja9v9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Derry Corporation is expected to have an EBIT of $2,750,000 next year. Depreciation, the
increase in net working capital, and capital spending are expected to be $210,000, $115,000,
and $215,000, respectively. All are expected to grow at 20 percent per year for four years.
The company currently has $16,000,000 in debt and 825,000 shares outstanding. At Year 5,
you believe that the company's sales will be $28,000,000 and the appropriate price-sales
ratio is 2.6. The company's WACC is 8.9 percent and the tax rate is 21 percent. What is the
price per share of the company's stock?
Note: Do not round intermediate calculations and round your answer to 2 decimal places,
e.g., 32.16.
Share price
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