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Fincher Manufacturing has projected sales of $147.8 million next year. Costs are expected to be $82.4...

Fincher Manufacturing has projected sales of $147.8 million next year. Costs are expected to be $82.4 million and net investment is expected to be $16.4 million. Each of these values is expected to grow at 16 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 8 percent, where it is expected to remain indefinitely. There are 6.9 million shares of stock outstanding and investors require a return of 15 percent return on the company’s stock. The corporate tax rate is 40 percent. The current stock price is $55.51.

a. Using Excel, suppose instead that you estimate the terminal value of the company using a PE multiple. The industry PE multiple is 14. What is your new estimate of the company’s stock price?

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jeff jeffy answered 1 year ago
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