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13. Sora Industries has 60 million outstanding shares, $120 million in debt, $44 million in cash, and the following projected free cash flow for the next four years:

Year	0	1	2	3	4
Earnings and FCF Forecast($ millions)
Sales	433	468	516	547	574.3
Growth versus Prior Year		8.10%	10.30%	6.00%	5.00%
Cost of Goods Sold		-313.6	-345.7	-366.5	-384.8
Growth Profit		154.4	170.3	180.5	189.5
Selling, General and Administrative		-93.6	-103.2	-109.4	-114.9
Depreciation		-7	-7.5	-9	-9.5
EBIT		53.8	59.6	62.1	65.2
Less: Income Tax at 40%		-21.5	-23.8	-24.8	-26.1
Plus: Depreciation		7	7.5	9	9.5
Less: Capital Expenditures		-7.7	-10	-9.9	-10.4
Less: Increase in NWC		-6.3	-8.6	-5.6	-4.9
Free Cash Flow		25.3	24.6	30.8	33.3

a. Suppose Soras revenue and free cash flow are expected to grow at a 5.5% rate beyond year 4. If Soras weighted average cost of capital is 10%, what is the value of Soras stock based on this information?

b. Soras 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 stocks value change?

c. Lets return to the assumptions of part (a) and suppose Sora can maintain its cost of goods sold at 67% of sales. However, now suppose Sora 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. Soras net working capital needs were estimated to be 18% of sales (which is their current level in year 0). If Sora can reduce this requirement to 12% of sales starting in year 1, but all other assumptions remain as in part (a), what stock price do you estimate for Sora? (Hint: This change will have the largest impact on Soras free cash flow in year 1.)