You have looked at the current financial statements for J&R Homes, Company. Thecompany has an EBIT of $2,890,000 this year. Depreciation, the increase in net workingcapital, and capital spending were $227,000, $92,000, and $425,000, respectively. Youexpect that over the next five years, EBIT will grow at 18 percent per year, depreciationand capital spending will grow at 23 percent per year, and NWC will grow at 13 percentper year. The company currently has $15.5 million in debt and 415,000 sharesoutstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3.5percent indefinitely. The company's WACC is 8.9 percent and the tax rate is 23percent. What is the price per share of the company's stock? (Do not roundintermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)Share price

Here,EBIT is $2,890,000Depreciation is $227,000Net Working Capital is $92,000Capital Spending is…

Answered: You have looked at the current…

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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Technology Inc. expects to have the following data during the coming year. What is Hernandez's expected ROE? Also, discuss the importance of the ROE to a company and to shareholders. $200,000 Interest rate 65% Tax rate Assets 8% D/A 40% EBIT $25,000
Pearl Corp. is expected to have an EBIT of $2,400,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $105,000, and $145,000, respectively. All are expected to grow at 20 percent per year for four years. The company currently has $12,500,000 in debt and 1,050,000 shares outstanding. At Year 5, you believe that the company's sales will be $20,400,000 and the appropriate price-sales ratio is 2.6. The company’s WACC is 8.9 percent and the tax rate is 21 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.)
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