Suppose next year’s projected sales equal $10 million, costs of goods sold are 6
ID: 2673392 • Letter: S
Question
Suppose next year’s projected sales equal $10 million, costs of goods sold are 60% of sales, S&A expenses and depreciation are $1 million each, interest expense is $0.5 million, and the tax rate is 35%. Ignoring changes in net working capital and capital expenditures and assuming that free cash flows are projected to grow forever at 3% and that the cost of capital is 8%, what is the enterprise value of the firm?a. $26.00 million
b. $36.00 million
c. $46.00 million
d. $47.38 million
Suppose this firm has $10 million in cash and $12 million in debt. Suppose it also has 5 million shares outstanding and a price per share of $5. Given this information, the $5 price is
a. Too high
b. Too low
c. Just right
d. The concepts in questions are unrelated.
Explanation / Answer
d. $47.38 million a. Too high