Stock’s Value Change Assignment | Homework For You

Sora Industries has $60 million outstanding shares, $129 million in debt, $ 49 +million in cash, and the following projected free cash flow for the next four years:

Year 2 3 4 Earnings and FCF Forecast ($ million)

1 Sales 433.0 468.0 516.0 547.0 574.3

2 Growth vs. Prior Year 8.1% 10.3% 6.0% 5.0% (313.6) (345.7) (366.5)(384.8)

3 Cost of Goods Sold 4 Gross Profit 154.4 170.3 180.5 189.5 (93.6) (103.2)(109.4)(114.9) (7.0) (7.5) (9.0) (9.5)

5 Selling, General, & Admin.

6 Depreciation 59.6

7 EBIT 53.8 62.1 65.2

8 Less: Income Tax at 40% (21.5) (23.8) (24.8) (26.1)

9 Plus: Depreciation

10 Less: Capital Expenditures 7.0 7.5 9.0 9.5 (7.7) (10.0) (9.9) (10.4) (6.3) (8.6) (5.6) (4.9)

11 Less: Increase in NWC 33.3 12 Free Cash Flow 25.3 24.6 30.8

b. Soras cost of goods sold was assumed to be 67% of sales. If its cost of goods sold is actually 70% of sales, how would the estimate of the stock’s value change?Get Finance homework help today