Derry Corporation is expected to have an EBIT of $2,700,000 next year. Increases indepreciation, the increase in net working capital, and capital spending are expected tobe $160,000, $120,000, and $160,000, respectively. All are expected to grow at 17percent per year for four years. The company currently has $14,000,000 in debt and1,200,000 shares outstanding. At Year 5, you believe that the company's sales will be$20,740,000 and the appropriate price-sales ratio is 2.9. The company's WACC is 9.3percent and the tax rate is 24 percent. What is the price per share of the company'sstock? (Do not round intermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)Share price

The stock price shows only the current or market worth of a corporation. As a result, the price…

Answered: percent and the tax rate is 24 percent.…

percent and the tax rate is 24 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.)

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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Question

Derry Corporation is expected to have an EBIT of $2,700,000 next year. Increases in
depreciation, the increase in net working capital, and capital spending are expected to
be $160,000, $120,000, and $160,000, respectively. All are expected to grow at 17
percent per year for four years. The company currently has $14,000,000 in debt and
1,200,000 shares outstanding. At Year 5, you believe that the company's sales will be
$20,740,000 and the appropriate price-sales ratio is 2.9. The company's WACC is 9.3
percent and the tax rate is 24 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.)
Share price

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Baker Industries' net income is $24,000, its interest expense is $4,000, and its tax rate is 25%. Its notes payable equals $24,000, long-term debt equals $75,000, and common equity equals $240,000. The firm finances with only debt and common equity, so it has no preferred stock. What are the firm's ROE and ROIC? Do not round intermediate calculations. Round your answers to two decimal places. ROE: ROIC: 10 Hide Feedback Partially Correct
Baker Industries' net income is $27,000, its interest expense is $5,000, and its tax rate is 25%. Its notes payable equals $26,000, long-term debt equals $75,000, and common equity equals $250,000. The firm finances with only debt and common equity, so it has no preferred stock. What are the firm's ROE and ROIC? Do not round intermediate calculations. Round your answers to two decimal places. ROE: ROIC: % %

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