• Kenneth Cole (KCP) had sales of $518 million in 2005. Suppose you expect its sales to grow at a 9% rate in 2006, but that this growth rate will slow by 1% per year to a long-run growth rate for the apparel industry of 4% by 2011.
• Based on KCP's past profitability and investment needs, you expect EBIT to be 9% of sales, increases in net working capital requirements to be 10% of any increase in sales, and net investment (capital expenditures in excess of depreciation) to be 8% of any increase in sales.
• If KCP has $100 million in cash, $3 million in debt, 21 million shares outstanding, a tax rate of 37%, and a weighted average cost of capital of 11%, what is your estimate of the value of KCP's stock in early 2006?
Problem: What if initial sales were to be 600 million instead of 518 million and the WACC was 12% (assume the growth and other ratios are the same as before) Find the enterprise value and the current stock price?