Use the Table for the Question(s) Below

question 31

Multiple Choice

Use the table for the question(s) below. FCF Forecast ($ million)
Banco Industries expect sales to grow at a rapid rate over the next three years, but settle to an industry growth rate of 5% in year 4. The spreadsheet above shows a simplified pro forma for Banco Industries. If Banco industries has a weighted average cost of capital of 11%, $50 million in cash, $80 million in debt, and 18 million shares outstanding, which of the following is the best estimate of Banco's stock price at the start of year 1?

• A) $6.52
• B) $11.74
• C) $13.04
• D) $23.48

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Definitions:

Emitted

Refers to the act of sending out or giving off something, such as light, heat, or signals.

Elicited

Brought about or provoked; in psychology, it often refers to responses or reactions that are drawn out by specific stimuli or conditions.

Respondent

An individual who answers or responds to a survey, questionnaire, or experiment.

Variable-Ratio

A type of reinforcement schedule used in operant conditioning where reinforcement is given after an unpredictable number of responses.