Question

# URGENT!! 30 MINUTES LEFT!! You have looked at the current financial statements for Reigle Homes, Co....

 URGENT!! 30 MINUTES LEFT!! You have looked at the current financial statements for Reigle Homes, Co. The company has an EBIT of \$3,090,000 this year. Depreciation, the increase in net working capital, and capital spending were \$237,000, \$102,000, and \$475,000, respectively. You expect that over the next five years, EBIT will grow at 18 percent per year, depreciation and capital spending will grow at 23 percent per year, and NWC will grow at 13 percent per year. The company has \$17,500,000 in debt and 360,000 shares outstanding. You believe that sales in five years will be \$18,810,000 and the price-sales ratio will be 3.1. The company’s WACC is 8.5 percent and the tax rate is 23 percent.
 What is the price per share of the company's stock?

 0 1 2 3 4 5 EBIT 3,090,000 3,646,200 4,302,516 5,076,969 5,990,823 7,069,171 Depreciation 237,000 291,510 358,557 441,025 542,461 667,227 NWC 102,000 115,260 130,244 147,175 166,308 187,928 Capex 475,000 584,250 718,628 883,912 1,087,212 1,337,270 FCF 2,039,300 2,399,574 2,822,623 3,319,204 3,901,875 4,585,291 TV 58,311,000 EV \$51,852,296 Equity Value \$34,352,296 Stock Price \$95.42

Forecast EBIT, Depreciation, NWC and Capex given the growth rates.

Free Cash Flow (FCF) = EBIT x (1 - tax) + Depreciation - NWC - Capex

Terminal Value (TV) of the firm = Sales x P/S in year 5

Enterprise Value (EV) is the present value of FCF and TV using WACC

Equity Value = EV - Debt

Stock Price = Equity Value / No. of shares

#### Earn Coins

Coins can be redeemed for fabulous gifts.