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Business, 12.12.2019 00:31 leilakainani26

Can the recommended offering price of $28 per share for netscape’s stock be justified? in valuing netscape, you might find it to use the following assumptions: • total cost of revenues remains at 10.4% of total revenues. • r& d remains at 36.7% of total revenues. • other operating expenses decline on a straight-line basis from 80.9% of revenues in 1995 to 20.9% of revenues in 2001 (this would give netscape a ratio of operating income to revenues close to microsoft’s, which is about 34%). • capital expenditures decline from 45.8% of revenues in 1995 to 10.8% of revenues by 2001 (again, close to microsoft’s experience). • depreciation is held constant at 5.5% of revenues. • changes in net working capital of essentially zero. • long-term steady-state growth of 4% annually after 2005. • a long-term riskless interest rate of 6.71%. given these assumptions, and starting from its current sales base of $16.625 million, how fast must netscape grow on an annual basis over the next ten years to justify a $28 share value?

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