Estimate of the current stock price

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Fincher Manufacturing has projected sales of $147.6 million next year. Costs are expected to be $82.3 million and net investment is expected to be $16.3 million. Each of these values is expected to grow at 17 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 9 percent, where it is expected to remain indefinitely. There are 6.8 million shares of stock outstanding and investors require a return of 16 percent return on the company's stock. The corporate tax rate is 35 percent.

a. What is your estimate of the current stock price: $ 64.40

b. Suppose instead that you estimate the terminal value of the company using a PE multiple. The industry PE multiple is 12. What is your new estimate of the company's stock price?

Reference no: EM131493340

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