What is the price per share of the company's stock?

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
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Derry Corporation is expected to have an EBIT of $2,550,000 next year. Depreciation, the increase in net working capital, and capital
spending are expected to be $190,000, $95,000, and $195,000, respectively. All are expected to grow at 16 percent per year for four
years. The company currently has $14,000,000 in debt and 805,000 shares outstanding. At Year 5, you believe that the company's
sales will be $27,600,000 and the appropriate price-sales ratio is 2.2. The company's WACC is 8.5 percent and the tax rate is 22
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
Transcribed Image Text:Derry Corporation is expected to have an EBIT of $2,550,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $190,000, $95,000, and $195,000, respectively. All are expected to grow at 16 percent per year for four years. The company currently has $14,000,000 in debt and 805,000 shares outstanding. At Year 5, you believe that the company's sales will be $27,600,000 and the appropriate price-sales ratio is 2.2. The company's WACC is 8.5 percent and the tax rate is 22 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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