Sora Industries has 61 million outstanding shares, $130 million in debt, $60 million in cash, and...

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Sora Industries has 61 million outstanding shares, $130 million indebt, $60 million in cash, and the following projected free cashflow for the next four years:
Year 0 1 2 3 4
Earnings and FCF Forecast ($ million)
1 Sales 433 468 516 547 574.3
2 Growth vs. Prior Year 8.1% 10.3% 6.0% 5.0%
3 Cost of Goods Sold (313.6) (345.7) (366.5) (384.8)
4 Gross Profit 154.4 170.3 180.5 189.5
5 Selling, General, & Admin. (93.6) (103.2) (109.4) (114.9)
6 Depreciation (7.0) (7.5) (9.0) (9.5)
7 EBIT 53.8 59.6 62.1 65.2
8 Less: Income Tax at 40% (21.5) (23.8) (24.8) (26.1)
9 Plus: Depreciation 7 7.5 9 9.5
10 Less: Capital Expenditures (7.7) (10.0) (9.9) (10.4)
11 Less: Increase in NWC (6.3) (8.6) (5.6) (4.9)
12 Free Cash Flow 25.3 24.6 30.8 33.3
a. Suppose? Sora's revenue and free cash flow are expected togrow at a 3.3 % rate beyond year four. If? Sora's weighted averagecost of capital is 9.0 %, what is the value of Sora stock based onthis? information?
b.? Sora's cost of goods sold was assumed to be? 67% of sales.If its cost of goods sold is actually? 70% of? sales, how would theestimate of the? stock's value? change?
c. Return to the assumptions of part ?(a?) and suppose Sora canmaintain its cost of goods sold at? 67% of sales.? However, thefirm reduces its? selling, general, and administrative expensesfrom? 20% of sales to? 16% of sales. What stock price would youestimate? now? (Assume no other? expenses, except? taxes, are?affected.)
d.? Sora's net working capital needs were estimated to be? 18%of sales? (their current level in year? zero). If Sora can reducethis requirement to? 12% of sales starting in year? 1, but allother assumptions are as in ?(a?), what stock price do you estimatefor? Sora?
?(Hint?: This change will have the largest impact on? Sora'sfree cash flow in year? 1.)

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Sora Industries has 61 million outstanding shares, $130 million indebt, $60 million in cash, and the following projected free cashflow for the next four years:Year01234Earnings and FCF Forecast ($ million)1Sales433468516547574.32Growth vs. Prior Year8.1%10.3%6.0%5.0%3Cost of Goods Sold(313.6)(345.7)(366.5)(384.8)4Gross Profit154.4170.3180.5189.55Selling, General, & Admin.(93.6)(103.2)(109.4)(114.9)6Depreciation(7.0)(7.5)(9.0)(9.5)7EBIT53.859.662.165.28Less: Income Tax at 40%(21.5)(23.8)(24.8)(26.1)9Plus: Depreciation77.599.510Less: Capital Expenditures(7.7)(10.0)(9.9)(10.4)11Less: Increase in NWC(6.3)(8.6)(5.6)(4.9)12Free Cash Flow25.324.630.833.3a. Suppose? Sora's revenue and free cash flow are expected togrow at a 3.3 % rate beyond year four. If? Sora's weighted averagecost of capital is 9.0 %, what is the value of Sora stock based onthis? information?b.? Sora's cost of goods sold was assumed to be? 67% of sales.If its cost of goods sold is actually? 70% of? sales, how would theestimate of the? stock's value? change?c. Return to the assumptions of part ?(a?) and suppose Sora canmaintain its cost of goods sold at? 67% of sales.? However, thefirm reduces its? selling, general, and administrative expensesfrom? 20% of sales to? 16% of sales. What stock price would youestimate? now? (Assume no other? expenses, except? taxes, are?affected.)d.? Sora's net working capital needs were estimated to be? 18%of sales? (their current level in year? zero). If Sora can reducethis requirement to? 12% of sales starting in year? 1, but allother assumptions are as in ?(a?), what stock price do you estimatefor? Sora??(Hint?: This change will have the largest impact on? Sora'sfree cash flow in year? 1.)

		Year	0	1	2	3	4
Earnings and FCF Forecast ($ million)
1	Sales		433	468	516	547	574.3
2	Growth vs. Prior Year			8.1%	10.3%	6.0%	5.0%
3	Cost of Goods Sold			(313.6)	(345.7)	(366.5)	(384.8)
4	Gross Profit			154.4	170.3	180.5	189.5
5	Selling, General, & Admin.			(93.6)	(103.2)	(109.4)	(114.9)
6	Depreciation			(7.0)	(7.5)	(9.0)	(9.5)
7	EBIT			53.8	59.6	62.1	65.2
8	Less: Income Tax at 40%			(21.5)	(23.8)	(24.8)	(26.1)
9	Plus: Depreciation			7	7.5	9	9.5
10	Less: Capital Expenditures			(7.7)	(10.0)	(9.9)	(10.4)
11	Less: Increase in NWC			(6.3)	(8.6)	(5.6)	(4.9)
12	Free Cash Flow			25.3	24.6	30.8	33.3