Use the Table for the Question(s)below

question 16

Multiple Choice

Use the table for the question(s) below.
-Banco Industries expect sales to grow at a rapid rate over the next 3 years, but settle to an industry growth rate of 5% in year 4. The spreadsheet above shows a simplified pro forma for Banco Industries. Banco Industries has a weighted average cost of capital of 12%, $50 million in cash, $60 million in debt, and 18 million shares outstanding. If Banco Industries can reduce their operating expenses so that EBIT becomes 12% of sales, by how much will their share price increase?

• A)$4.98
• B)$2.81
• C)$8.89
• D)$3.36

---

Definitions:

Standard of Deferred Payment

A function of money that allows for goods and services to be paid for at a future date.

M1

Refers to a category of the money supply that includes all physical money, such as coins and currency, as well as demand deposits, checking accounts, and negotiable order of withdrawal (NOW) accounts.

Passbook Savings Account

A type of savings account where transactions are recorded in a physical booklet, allowing depositors to track account activity manually.

Checking Accounts

Banking accounts that allow depositors to write checks and use electronic debit to access funds for transactions and withdrawals.