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Dewey Corp. is expected to have an EBIT of $3,250,000 next year. Depreciation, the increase in...

Dewey Corp. is expected to have an EBIT of $3,250,000 next year. Depreciation, the increase in net working capital, and capital spending are expected to be $260,000, $165,000, and $265,000, respectively. All are expected to grow at 18 percent per year for four years. The company currently has $21,000,000 in debt and 875,000 shares outstanding. At Year 5, you believe that the company's sales will be $29,000,000 and the appropriate price-sales ratio is 2.5. The company’s WACC is 8.8 percent and the tax rate is 21 percent. What is the price per share of the company's stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

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Price per share of the company's stock = $45.26

Workings:

Year EBIT Tax EBIT - Tax Depreciation Increase in NWC Capital spending FCF
a b c d (a+b-c-d)
1 3250000 682500 2567500 260000 165000 265000 2397500
2 3835000 805350 3029650 306800 194700 312700 2829050
3 4525300 950313 3574987 362024 229746 368986 3338279
4 5339854 1121369 4218485 427188 271100 435403 3939169
5 6301028 1323216 4977812 504082 319898 513776 4648220
Type Cash flows PV @ 8.8% Present value
(a) (b) (a*b)
FCF 1 2397500 0.919117647 2203584.559
FCF 2 2829050 0.844777249 2389917.077
FCF 3 3338279 0.776449678 2592005.653
FCF 4 3939169.22 0.713648601 2811182.602
FCF 5 4648219.68 0.655927023 3048892.895
Firm value at the end of year 5 72500000 [29,000,000*2.5] 0.655927023 47554709.14
Value of the firm 60600291.93
Less :Value of debt 21000000
Value of equity 39600292
No of shares 875000
Value per share 45.26

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