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 12% every year over the next 5 years, after which you expect the growth rate to level off to 7% per year forever. The current company has 280 million in PP&E and 200 million in net working capital. You expect the operating margins to be 25 percent with the tax rate of 24 percent. If the weighted average cost of capital of AppleBanana Inc. is 8.28 percent, the company is 1/3 debt and 2/3 equity, with one billion shares outstanding, the stock price should be _____. (Do not round intermediate calculations. Round your answer to two decimal places.)
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 12% every year over the next 5 years, after which you expect the growth rate to level off to 7% per year forever. The current company has 280 million in PP&E and 200 million in net working capital. You expect the operating margins to be 25 percent with the tax rate of 24 percent. If the weighted average cost of capital of AppleBanana Inc. is 8.28 percent, the company is 1/3 debt and 2/3 equity, with one billion shares outstanding, the stock price should be _____. (Do not round intermediate calculations. Round your answer to two decimal places.)
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 12% every year over the next 5 years, after which you expect the growth rate to level off to 7% per year forever. The current company has 280 million in PP&E and 200 million in net working capital. You expect the operating margins to be 25 percent with the tax rate of 24 percent. If the weighted average cost of capital of AppleBanana Inc. is 8.28 percent, the company is 1/3 debt and 2/3 equity, with one billion shares outstanding, the stock price should be _____. (Do not round intermediate calculations. Round your answer to two decimal places.)
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