Estimate of the current stock price

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Eberhart Manufacturing has projected sales of $146.4 million next year. Costs are expected to be $81.7 million and net investment is expected to be $15.7 million. Each of these values is expected to grow at 15 percent the following year, with the growth rate declining by 2 percent per year until the growth rate reaches 7 percent, where it is expected to remain indefinitely. There are 6.2 million shares of stock outstanding and investors require a return of 14 percent return on the company's stock. The corporate tax rate is 39 percent. (Do not round intermediate calculations and round your answer to 2 decimal places. (e.g., 32.16))

a. What is your estimate of the current stock price?

b. Suppose instead that you estimate the terminal value of the company using a PE multiple. The industry PE multiple is 10. What is your new estimate of the company's stock price?

Reference no: EM132404524

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