Franktown Motors is expected to have an EBIT of $2.2 million next year. Depreciation, the increase in net working capital, and capital spending are expected to be $158,000, $92,000, and $114,000, respectively. All are expected to grow at 15 percent per year for four years. The firm currently has $12 million in debt and 750,000 shares outstanding. After year 5, the adjusted cash flow from assets is expected to grow at 2.5 percent indefinitely. The company’s WACC is 8.7 percent and the tax rate is 34 percent. What is the price per share of the company’s stock? $27.82 $29.34 $22.07 $26.12 $16.47

Franktown Motors is expected to have an EBIT of $2.2 million next year. Depreciation, the increase in net working capital, and capital spending are expected to be $158,000, $92,000, and $114,000, respectively. All are expected to grow at 15 percent per year for four years. The firm currently has $12 million in debt and 750,000 shares outstanding. After year 5, the adjusted cash flow from assets is expected to grow at 2.5 percent indefinitely. The company’s WACC is 8.7 percent and the tax rate is 34 percent. What is the price per share of the company’s stock? $27.82 $29.34 $22.07 $26.12 $16.47

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 20P

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