Use the table for the question(s) below. FCF Forecast ($ million) Year 0 1 2 3...

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Use the table for the question(s) below. FCF Forecast ($ million) Year 0 1 2 3 4 Sales 240 270 290 310 325.5 Growth versus Prior Year 12.5% 7.4% 6.9% 5.0% EBIT (10% of Sales) 27.00 29.00 31.00 32.55 Less: Income Tax (37%) (9.99) 10.73 11.47 12.44 Less: Increase in NWC (12% of Change in Sales) Free Cash Flow 13.41 3.6 15.87 2.4 2.4 1.86 17.13 18.65 Banco Industries expect sales to grow at a rapid rate over the next 3 years, but settle to an industry growth rate of 7% in year 4. The spreadsheet above shows a simplified pro forma for Banco Industries. Banco industries has a weighted average cost of capital of 10%, $50 million in cash, $70 million in debt, and 18 million shares outstanding. If Banco Industries can reduce their operating expenses so that EBIT becomes 12% of sales, by how much will their stock price increase? Use the table for the question(s) below. FCF Forecast ($ million) Year 0 1 2 3 4 Sales 240 270 290 310 325.5 Growth versus Prior Year 12.5% 7.4% 6.9% 5.0% EBIT (10% of Sales) 27.00 29.00 31.00 32.55 Less: Income Tax (37%) (9.99) 10.73 11.47 12.44 Less: Increase in NWC (12% of Change in Sales) Free Cash Flow 13.41 3.6 15.87 2.4 2.4 1.86 17.13 18.65 Banco Industries expect sales to grow at a rapid rate over the next 3 years, but settle to an industry growth rate of 7% in year 4. The spreadsheet above shows a simplified pro forma for Banco Industries. Banco industries has a weighted average cost of capital of 10%, $50 million in cash, $70 million in debt, and 18 million shares outstanding. If Banco Industries can reduce their operating expenses so that EBIT becomes 12% of sales, by how much will their stock price increase?

Answer rating: 100% (QA)

To calculate the increase in the stock price due to the reduction in operating expenses we need to follow these steps 1 Calculate the free cash flows FCF for each year using the given information 2 De... View the full answer