Use the Table for the Question(s) Below

question 28

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 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 11%, $40 million in cash, $70 million in debt, and 18 million shares outstanding. If Banco Industries can reduce its operating expenses so that EBIT becomes 12% of sales, by how much will its stock price increase?

• A) $3.27
• B) $3.92
• C) $5.72
• D) $9.80

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Definitions:

Public Officials

Individuals elected or appointed to carry out governmental duties and responsibilities.

Give Consideration

To provide something of value such as money, goods, or services as part of a contract or agreement.

Gratuitous

Referring to something given without expecting anything in return, often related to acts of kindness or voluntary transactions without compensation.

Preexisting Duty

A legal concept indicating that if someone is already legally obligated to perform a certain action, that action cannot be used as consideration for a new contract.