Pearl Corp. is expected to have an EBIT of $2,400,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $105,000, and $145,000, respectively. All are expected to grow at 20 percent per year for four years. The company currently has $12,500,000 in debt and 1,050,000 shares outstanding. At Year 5, you believe that the company's sales will be $20,400,000 and the appropriate price-sales ratio is 2.6. The company’s WACC is 8.9 percent and the tax rate is 21 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.)

Question

Pearl Corp. is expected to have an EBIT of $2,400,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $160,000, $105,000, and $145,000, respectively. All are expected to grow at 20 percent per year for four years. The company currently has $12,500,000 in debt and 1,050,000 shares outstanding. At Year 5, you believe that the company's sales will be $20,400,000 and the appropriate price-sales ratio is 2.6. The company’s WACC is 8.9 percent and the tax rate is 21 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.)

 

Expert Answer

Want to see the step-by-step answer?

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times may vary by subject and question complexity. Median response time is 34 minutes for paid subscribers and may be longer for promotional offers.
Tagged in
Business
Finance

Investment Management

Related Finance Q&A

Find answers to questions asked by students like you.

Q: Describe the Incremental Analysis for Cost-Only Projects?

A: The incremental cost is the additional cost incurred for producing an additional one unit of a produ...

Q: If a new competitor enters the Chinese market in the near future that could bring pressure, how woul...

A: The Chinese market is one of the most competitive markets in the world and many firms are competing ...

Q: Consider the folloving scenario analysis: Rate of Return Scenario Recession Probability Stocks Bonds...

A: Formulas:

Q: You estimate the expected return on a stock to be 10%.  The required rate of return on this stock is...

A: Expected return of a stock is 10%, required return is 12%, beta is 1.2 and standard deviation is 25%...

Q: A five-year 2.4% defaultable coupon bond is selling to yield 3% (Annual Percent Rate and semi-annual...

A: Click to see the answer

Q: You are going to withdraw OMR5,000 at the end of each year for the next four years from an account t...

A: Calculate the present value by using excel as follows: Present value is 16,198.60 -----------------...

Q: Increasing a firm’s outstanding equity will increase firm leverage. True False

A: Leverage means use of borrowed funds in companies capital structure. Due to used of borrowed funds c...

Q: Projects A and B have approximately the same NPV. Their initial outlays are similar in size. Project...

A: The question is based on the concept of capital budgeting approaches for selection of project in cas...

Q: Two bonds A and B have the same credit rating, the same par value and the same coupon rate. Bond A h...

A: Hello. Since your question has multiple sub-parts, we will solve the first three sub-parts for you. ...