Problem 8-08 A company had $20 of sales per share for the year that just ended. You expect the company to grow their sales at 6.5 percent for the next five years. After that, you expect the company to grow 3.5 percent in perpetuity. The company has a 13 percent ROE and you expect that to continue forever. The company's net margins are percent and the cost of equity is 8 percent. Use the free cash flow to equity model to value this stock. Do not round intermediate calculations. Round your answer to the nearest cent. $

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
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Problem 8-08
A company had $20 of sales per share for the year that just ended. You expect the company to grow their sales at 6.5 percent for the next five years. After that, you expect the company to grow 3.5 percent in
perpetuity. The company has a 13 percent ROE and you expect that to continue forever. The company's net margins are 5 percent and the cost of equity is 8 percent. Use the free cash flow to equity model to
value this stock. Do not round intermediate calculations. Round your answer to the nearest cent.
$
Transcribed Image Text:Problem 8-08 A company had $20 of sales per share for the year that just ended. You expect the company to grow their sales at 6.5 percent for the next five years. After that, you expect the company to grow 3.5 percent in perpetuity. The company has a 13 percent ROE and you expect that to continue forever. The company's net margins are 5 percent and the cost of equity is 8 percent. Use the free cash flow to equity model to value this stock. Do not round intermediate calculations. Round your answer to the nearest cent. $
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