8. A company had $18 of sales per share for the year that just ended. You expect the com- pany to grow their sales at 6.5 percent for the next five years. After that, you expect the company to grow 3.5 percent in perpetuity. The company has a 14 percent ROE and expect that to continue forever. The company's net margins are 6 percent and the cost of equity is 11 percent. Use the free cash flow to equity model to value this stock. 8. you
8. A company had $18 of sales per share for the year that just ended. You expect the com- pany to grow their sales at 6.5 percent for the next five years. After that, you expect the company to grow 3.5 percent in perpetuity. The company has a 14 percent ROE and expect that to continue forever. The company's net margins are 6 percent and the cost of equity is 11 percent. Use the free cash flow to equity model to value this stock. 8. you
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 22P
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Transcribed Image Text:8. A company had $18 of sales per share for the year that just ended. You expect the com-
pany to grow their sales at 6.5 percent for the next five years. After that, you expect the
company to grow 3.5 percent in perpetuity. The company has a 14 percent ROE and
expect that to continue forever. The company's net margins are 6 percent and the cost of
equity is 11 percent. Use the free cash flow to equity model to value this stock.
8.
you
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