Sora Industries has 64 million outstanding shares, $128 million in debt, $49 million in cash, and...

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Sora Industries has 64 million outstanding shares, $128 million in debt, $49 million in cash, and the following projected free cash flow for the next four years: a. Suppose Sora's revenue and free cash flow are expected to grow at a 3.4% rate beyond year four. If Sora's weighted average cost of capital is 13.0%, what is the value of Sora stock based on this information? b. Sora's cost of goods sold was assumed to be 67% of sales. If its cost of goods sold is actually 70% of sales, how would the estimate of the stock's value change? c. Return to the assumptions of part (a) and suppose Sora can maintain its cost of goods sold at 67% of sales. However, the firm reduces its selling, general, and administrative expenses from 20% of sales to 16% of sales. What stock price would you estimate now? (Assume no other expenses, except taxes, are affected.) d. Sora's net working capital needs were estimated to be 18% of sales (their current level in year zero). If Sora can reduce this requirement to 12% of sales starting in year 1, but all other assumptions are as in (a), what stock price do you estimate for Sora? (Hint: This change will have the largest impact on Sora's free cash flow in year 1.) a. Suppose Sora's revenue this information? Data table 13.0%, what is the value of Sora stock based on (Click on the following icon in order to copy its contents into a spreadsheet.) The stock price for this cas 1 Year 0 1 2 3 4 b. Sora's cost of goods sol k's value change? 2 Earnings and FCF Forecast ($ million) The stock price for this cas 3 Sales 433.00 4 Growth Versus Prior Year c. Return to the assumption of sales to 16% of sales. W 5 Cost of Goods Sold 6 Gross Profit 468.00 516.00 547.00 574.30 8.1% 10.3% 6.0% 5.0% (313.56) (345.72) (366.49) (384.78) 154.44 170.28 180.51 189.52 (93.60) (103.20) (109.40) (114.86) (7.00) (7.50) (9.00) (9.50) g, general, and administrative expenses from 20% The stock price for this cas 7 Selling, General, and Administrative 8 Depreciation d. Sora's net working capit assumptions are as in (a), 9 The stock price for this cas P EBIT 10 Less: Income Tax at 25% 11 Plus: Depreciation 12 Less: Capital Expenditures 13 Less: Increase in NWC 14 Free Cash Flow 53.84 59.58 62.11 65.16 (13.46) (14.90) (15.53) (16.29) 7.00 7.50 9.00 9.50 (7.70) (10.00) (9.90) (10.40) (6.30) (8.64) (5.58) (4.91) 33.38 33.55 40.10 43.055 of sales starting in year 1, but all other ar 1.) Sora Industries has 64 million outstanding shares, $128 million in debt, $49 million in cash, and the following projected free cash flow for the next four years: a. Suppose Sora's revenue and free cash flow are expected to grow at a 3.4% rate beyond year four. If Sora's weighted average cost of capital is 13.0%, what is the value of Sora stock based on this information? b. Sora's cost of goods sold was assumed to be 67% of sales. If its cost of goods sold is actually 70% of sales, how would the estimate of the stock's value change? c. Return to the assumptions of part (a) and suppose Sora can maintain its cost of goods sold at 67% of sales. However, the firm reduces its selling, general, and administrative expenses from 20% of sales to 16% of sales. What stock price would you estimate now? (Assume no other expenses, except taxes, are affected.) d. Sora's net working capital needs were estimated to be 18% of sales (their current level in year zero). If Sora can reduce this requirement to 12% of sales starting in year 1, but all other assumptions are as in (a), what stock price do you estimate for Sora? (Hint: This change will have the largest impact on Sora's free cash flow in year 1.) a. Suppose Sora's revenue this information? Data table 13.0%, what is the value of Sora stock based on (Click on the following icon in order to copy its contents into a spreadsheet.) The stock price for this cas 1 Year 0 1 2 3 4 b. Sora's cost of goods sol k's value change? 2 Earnings and FCF Forecast ($ million) The stock price for this cas 3 Sales 433.00 4 Growth Versus Prior Year c. Return to the assumption of sales to 16% of sales. W 5 Cost of Goods Sold 6 Gross Profit 468.00 516.00 547.00 574.30 8.1% 10.3% 6.0% 5.0% (313.56) (345.72) (366.49) (384.78) 154.44 170.28 180.51 189.52 (93.60) (103.20) (109.40) (114.86) (7.00) (7.50) (9.00) (9.50) g, general, and administrative expenses from 20% The stock price for this cas 7 Selling, General, and Administrative 8 Depreciation d. Sora's net working capit assumptions are as in (a), 9 The stock price for this cas P EBIT 10 Less: Income Tax at 25% 11 Plus: Depreciation 12 Less: Capital Expenditures 13 Less: Increase in NWC 14 Free Cash Flow 53.84 59.58 62.11 65.16 (13.46) (14.90) (15.53) (16.29) 7.00 7.50 9.00 9.50 (7.70) (10.00) (9.90) (10.40) (6.30) (8.64) (5.58) (4.91) 33.38 33.55 40.10 43.055 of sales starting in year 1, but all other ar 1.)