What would have been your estimate of the market value

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Problem - Creative Inc. had sales of $10 billion in 2020. Suppose you expected its sales to grow at a rate of 10% in 2021, but then slow by 1% per year to the long-run growth rate that is characteristic of the electronic goods industry-5%-by 2026. Based on Creative's past profitability and investment needs, you expected EBIT to be 10% of sales, increases in net working capital requirements to be 10% of any increase in sales, and capital expenditures to equal depreciation expenses. If Creative had $1 billion in cash, $2 billion in debt, 1 billion shares outstanding, a tax rate of 20%, and a weighted average cost of capital 01 10%, what would have been your estimate of the market (intrinsic) value of Creative Inc's stock in early 2021?

Reference no: EM132966877

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