2 3 4 Use the table for the question(s) below. FCF Forecast ($ million) Year 0 1 Sales 240 270 Growth versus Prior Year 12.5% EBIT (10% of Sales) 27.00 Less: Income Tax (37%) (9.99) Less Increase in NWC (12% of Change 3.6 in Sales). Free Cash Flow 13.41 290 310 7.4% 6.9% 29.00 31.00 (10.73) (11.47) 325.5 5.0% 32.55 (12.44) 2.4 2.4 1.86 15.87 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 5% in year 4. The spreadsheet above shows a simplified pro forma for Banco Industries. Banco industries has a weighted average cost of capital of 11%, $40 million in cash, $70 million in debt, and 18 million shares outstanding. If Banco Industries can reduce its operating expenses so that EBIT becomes 12% of sales, by how much will its stock price increase? $3.27 $3.92 $5.72 $9.80