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The following information is known about a company: its operating assets the current year, 2019, are...

The following information is known about a company: its operating assets the current year, 2019, are $700 million and are expected to grow at a rate of 12% per year through 2022. Its operating liabilities are $430 million in 2019 and are expected to grow at a rate of 8% per year through 2022. Its after-tax operating income in 2019 is $30 million and is expected to grow at a rate of 14% per year through 2022. The firm's cost of capital is 8%. There are 14 million shares outstanding. Common stockholders' equity at the end of 2019 is $100 million. Residual operating income is expected to continue to grow at a rate of 7% per year after 2022. If the company's stock price currently trades at a value of $25.00 a share, what is your recommendation and why?

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Rahul Sunny answered 7 months ago
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