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

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