We find the following information on NPNG (No-Pain-No-Gain) Inc.: EBIT = $2,000,000 Depreciation = $250,000 Change in net working capital = $100,000 Net capital spending = $300,000 These numbers are projected to increase at the following supernormal rates for the next three years, and 5% after the third year for the foreseeable future: EBIT: 20% Depreciation: 10% Change in net working capital: 15% Net capital spending: 10% The firm’s tax rate is 35%, and it has 1,000,000 outstanding shares and $8,000,000 in debt. We have estimated the WACC to be 15%. c. Calculate the firm’s share price at time 0.
We find the following information on NPNG (No-Pain-No-Gain) Inc.: EBIT = $2,000,000 Depreciation = $250,000 Change in net working capital = $100,000 Net capital spending = $300,000 These numbers are projected to increase at the following supernormal rates for the next three years, and 5% after the third year for the foreseeable future: EBIT: 20% Depreciation: 10% Change in net working capital: 15% Net capital spending: 10% The firm’s tax rate is 35%, and it has 1,000,000 outstanding shares and $8,000,000 in debt. We have estimated the WACC to be 15%. c. Calculate the firm’s share price at time 0.
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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A4 9c
We find the following information on NPNG (No-Pain-No-Gain) Inc.:
EBIT = $2,000,000
Change in net working capital = $100,000
Net capital spending = $300,000
These numbers are projected to increase at the following supernormal rates for the next three years, and 5% after the third year for the foreseeable future:
EBIT: 20%
Depreciation: 10%
Change in net working capital: 15%
Net capital spending: 10%
The firm’s tax rate is 35%, and it has 1,000,000 outstanding shares and $8,000,000 in debt. We have estimated the WACC to be 15%.
c. Calculate the firm’s share price at time 0.
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