You have been given the following projections for Cali Corporation for

QUESTION

You have been given the following projections for Cali Corporation for the coming year. Sales = 10,000 units. Sales price per unit = $10. Variable cost per unit = $5. Fixed costs = $10,000. Bonds outstanding = $15,000. rd on outstanding bonds = 8%. Ta
Sales = 10,000 units Sales price per unit = $12 Variable cost per unit = $6 Fixed costs = $10,000 Long-term debt = $15,000 Interest rate on long-term debt = 8% Tax rate = 40% Dividend payout ratio = 60% Expected long-term growth rate = 8% Shares of common stock outstanding = 10,000 shares Beta = 1.4 Current rate on government T-Bonds = 3% Expected return on the stock market = 8% Sales—10,000 units x12 =120,000 Variable cost=10,000 units x6= 60,000 Fixed—————————10,000 Ebit——————-50,000

————1200(8%) EBT—————— 48800 TAXES———— 15520 NI——————33280 DIDV= NI X payout= 33280 X.6=19968 =19968/10000= 1.99-DIVIDEND kS = kRF (kM kRF)b = 0.05 (0.09 0.05)1.4 = 0.106 = 10.6%. P0 = D1/(kS g)= =1.99 /(0.106 0.08)= 76.53 Calculate the current price per share for Cali Corporation. ANSWER = 76.53 DOLLARS

ANSWER:

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