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You have looked at the current financial statements for Reigle Homes, Co. The company has an...

You have looked at the current financial statements for Reigle Homes, Co. The company has an EBIT of $3,170,000 this year. Depreciation, the increase in net working capital, and capital spending are expected to be $241,000, $106,000, and $495,000, respectively. You expect that over the next five years, EBIT will grow at 15 percent per year, depreciation and capital spending will grow at 20 percent per year, and NWC will grow at 10 percent per year. The company currently has $18.3 million in debt and 380,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3 percent indefinitely. The company’s WACC is 8.9 percent and the tax rate is 22 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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Expert Solution

0 1 2 3 4 5
EBIT $       31,70,000 $   36,45,500 $ 41,92,325 $ 48,21,174 $ 55,44,350 $        63,76,002
Tax at 22% $         6,97,400 $     8,02,010 $    9,22,312 $ 10,60,658 $ 12,19,757 $        14,02,721
NOPAT $       24,72,600 $   28,43,490 $ 32,70,014 $ 37,60,516 $ 43,24,593 $        49,73,282
Add: Depreciation $         2,41,000 $     2,89,200 $    3,47,040 $    4,16,448 $     4,99,738 $           5,99,685
Less: Increase in NWC $         1,06,000 $     1,16,600 $    1,28,260 $    1,41,086 $     1,55,195 $           1,70,714
Less: Capital spending $         4,95,000 $     5,94,000 $    7,12,800 $    8,55,360 $ 10,26,432 $        12,31,718
CFFA $       21,12,600 $   24,22,090 $ 27,75,994 $ 31,80,518 $ 36,42,704 $        41,70,534
PVIFA at 8.9% 1 0.91827 0.84323 0.77431 0.71103 0.65292
PV at $   22,24,141 $ 23,40,791 $ 24,62,715 $ 25,90,075 $        27,23,029
Cumulative PV $   1,23,40,752
Continuing value of CFFA = 2723029*1.03/(0.089-0.03) = $     4,75,37,625
PV of continuing value = 47537625*0.65292 = $   3,10,38,266
Value of the firm $   4,33,79,018
Less: Value of debt $   1,83,00,000
Value of common equity $   2,50,79,018
Number of shares $         3,80,000
Price per share of the company's stock $               66.00

jeff jeffy answered 1 year ago
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