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:

Common-value Setting

An environment in which the value of an item or resource is the same for all participants but may be unknown at the time of transaction.

Oral Auctions

Auctions where items or services are offered to the highest bidder through spoken offers.

Sealed Bid Auctions

Auctions where bidders submit their bids in secret and the highest bidder wins, often used to ensure fair and unbiased bidding processes.

Risk Averse

A characteristic of individuals or entities that prefer to avoid risk, leading them to choose safer, more predictable options or investments.