Use the table for the question(s) below. FCF Forecast ($ million) Year Sales Growth versus Prior Year EBIT (10% of Sales) Less: Income Tax (20%) 0 240 1 270 12.5% 27.00 2 290 7.4% 29.00 5.80 2.40 20.80 3 . 310 6.9% 31.00 6.20 2.40 22.40 4 325.5 5.0% 32.55 6.51 1:86 2418 (5.40) Less Increase in NWC (12% of Change in Sales) 3.60 Free Cash Flow 18.00 Banco Industries expect sales to grow at a rapid rate over the next three years, but settle to an industry growth rate
Use the table for the question(s) below. FCF Forecast ($ million) Year Sales Growth versus Prior Year EBIT (10% of Sales) Less: Income Tax (20%) 0 240 1 270 12.5% 27.00 2 290 7.4% 29.00 5.80 2.40 20.80 3 . 310 6.9% 31.00 6.20 2.40 22.40 4 325.5 5.0% 32.55 6.51 1:86 2418 (5.40) Less Increase in NWC (12% of Change in Sales) 3.60 Free Cash Flow 18.00 Banco Industries expect sales to grow at a rapid rate over the next three years, but settle to an industry growth rate
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
man.1

Transcribed Image Text:Use the table for the question(s) below.
FCF Forecast (S million)
Year
Sales
1
270
12.5%
27.00
(5.40)
Less Increase in NWC (12% of Change in Sales) 3.60
Free Cash Flow
18.00
Growth versus Prior Year
EBIT (10% of Sales)
Less: Income Tax (20%)
0
240
OA. $46.15
B. $25.64
OC. $12.82
D. $23.07
2
290
7.4%
29.00
5.80
2.40
20.80
•
3
310
6.9%
31.00
6.20
2.40
22.40
4
325.5
5.0%
32.55
6.51
1.86
2418
Banco Industries expect sales to grow at a rapid rate over the next three years, but settle to an industry growth rate of
7% in year 4. The spreadsheet above shows a simplified pro forma for Banco Industries. If Banco industries has a
weighted average cost of capital of 11%, $30 million in cash, $60 million in debt, and 18 million shares outstanding,
which of the following is the best estimate of Banco's stock price at the start of year 1?
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