Derry Corporation is expected to have an EBIT of $2,800,000 next year. Increases in depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $125,000, and $165,000, respectively. All are expected to grow at 18 percent per year for four years. The company currently has $14,500,000 in debt and 950,000 shares outstanding. At Year 5, you believe that the company's sales will be $22,260,000 and the appropriate price-sales ratio is 3.1. The company's WACC is 9.4 percent and the tax rate is 25 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price
Derry Corporation is expected to have an EBIT of $2,800,000 next year. Increases in depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $125,000, and $165,000, respectively. All are expected to grow at 18 percent per year for four years. The company currently has $14,500,000 in debt and 950,000 shares outstanding. At Year 5, you believe that the company's sales will be $22,260,000 and the appropriate price-sales ratio is 3.1. The company's WACC is 9.4 percent and the tax rate is 25 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Share price
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
Problem 8P
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Transcribed Image Text:Derry Corporation is expected to have an EBIT of $2,800,000 next year. Increases in
depreciation, the increase in net working capital, and capital spending are expected to
be $160,000, $125,000, and $165,000, respectively. All are expected to grow at 18
percent per year for four years. The company currently has $14,500,000 in debt and
950,000 shares outstanding. At Year 5, you believe that the company's sales will be
$22,260,000 and the appropriate price-sales ratio is 3.1. The company's WACC is 9.4
percent and the tax rate is 25 percent. What is the price per share of the company's
stock? (Do not round intermediate calculations and round your answer to 2 decimal
places, e.g., 32.16.)
Share price
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