Use the table for the question(s) below.
Banco Industries expect sales to grow at a rapid rate over the next 3 years, but settle to an industry growth rate of 5% in year 4. The spreadsheet above shows a simplified pro forma for Banco Industries. Banco industries has a weighted average cost of capital of 11%, $40 million in cash, $70 million in debt, and 18 million shares outstanding. If Banco Industries can reduce its operating expenses so that EBIT becomes 12% of sales, by how much will its stock price increase?

Question

Use the table for the question(s) below.
 Banco Industries expect sales to grow at a rapid rate over the next 3 years, but settle to an industry growth rate of 5% in year 4. The spreadsheet above shows a simplified pro forma for Banco Industries. Banco industries has a weighted average cost of capital of 11%, $40 million in cash, $70 million in debt, and 18 million shares outstanding. If Banco Industries can reduce its operating expenses so that EBIT becomes 12% of sales, by how much will its stock price increase?

Quizplus · Accepted Answer

A) Calculate FCF1 = $16.812 million, FCF2 = $19.524 million, 11eaabab_c08f_ad32_b90e_83664e135cef_TB5536_11 11eaabab_c08f_d443_b90e_7b112ce5bb41_TB5536_11 11eaabab_c08f_d444_b90e_d92011c37d48_TB5536_11 11eaabab_c08f_d445_b90e_351aa8bec2a9_TB5536_11 using a financial calculator, 11eaabab_c08f_d446_b90e_e7f1419bc53a_TB5536_11 million 11eaabab_c08f_fb57_b90e_ab365d26099e_TB5536_11 11eaabab_c08f_fb58_b90e_0df73a96c777_TB5536_11

Use the Table for the Question(s) Below