Use the Table for the Question(s) Below

question 46

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 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:

Functional Analysis

A method in behavioral psychology for identifying the causes and purposes of behaviors by analyzing their antecedents and consequences.

Motivation

The process that initiates, guides, and maintains goal-oriented behaviors, involving biological, emotional, social, and cognitive forces.

Behavior Modification Therapy

A form of psychotherapy that aims to change undesirable behaviors through the use of learning techniques such as reinforcement.

Unconscious Motivating Forces

Internal drives and desires that influence behavior and thought processes without the individual’s conscious awareness.