ou are applying the Discounted Cash Flow Model on AppleBanana Inc. The current sales of the company is 1.8 billion and you think sales will grow at 13% every year over the next 5 years, after which you expect the growth rate to level off to 6% per year forever. The company current has 280 million in PP&E and 200 million in net working capital. You expect the operating margins to be 30 percent with the tax rate of 34 percent. If the weighted average cost of capital of AppleBanana Inc. is 9.35 percent, the company is 1/3 debt and 2/3 equity, with one billion shares outstanding, the stock price should be
ou are applying the Discounted Cash Flow Model on AppleBanana Inc. The current sales of the company is 1.8 billion and you think sales will grow at 13% every year over the next 5 years, after which you expect the growth rate to level off to 6% per year forever. The company current has 280 million in PP&E and 200 million in net working capital. You expect the operating margins to be 30 percent with the tax rate of 34 percent. If the weighted average cost of capital of AppleBanana Inc. is 9.35 percent, the company is 1/3 debt and 2/3 equity, with one billion shares outstanding, the stock price should be
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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You are applying the Discounted Cash Flow Model on AppleBanana Inc. The current sales of the company is 1.8 billion and you think sales will grow at 13% every year over the next 5 years, after which you expect the growth rate to level off to 6% per year forever. The company current has 280 million in PP&E and 200 million in net working capital. You expect the operating margins to be 30 percent with the tax rate of 34 percent. If the weighted average cost of capital of AppleBanana Inc. is 9.35 percent, the company is 1/3 debt and 2/3 equity, with one billion shares outstanding, the stock price should be
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