None BlueTech Inc. is a company specializing in water purification technologies andsustainable water management solutions. The company develops advancedfiltration systems and water recycling equipment for both municipal andindustrial applications. The average P/E ratio for companies in the watertechnology sector, similar to BlueTech Inc., is 22. If BlueTech Inc.'s projectedearnings per share (EPS) are $3.75, what should be its estimated share pricebased on the industry average P/E ratio?

The P/E (Price-to-Earnings) Ratio is a common way to value a company. It tells you how much…

Answered: BlueTech Inc. is a company specializing…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter13: Valuation: Earnings-based Approach

Section: Chapter Questions

Problem 13PC

See similar textbooks

Similar questions

GTB, Incorporated has a 21 percent tax rate and has $100 million in assets, currently financed entirely with equity. Equity is worth $7 per share, and book value of equity is equal to market value of equity. Also, let's assume that the firm's expected values for EBIT depend upon which state of the economy occurs this year, with the possible values of EBIT and their associated probabilities as shown below: State Probability of state Expected EBIT in state Pessimistic 0.45 $ 5 million Standard deviation in EPS The firm is considering switching to a 40-percent-debt capital structure and has determined that it would have to pay a 12 percent yield on perpetual debt in either event. What will be the standard deviation in EPS if it switches to the proposed capital structure and can take full advantage of the debt interest tax shields? Note: Do not round intermediate calculations and round your final answer to 2 decimal places. Optimistic 0.55 $19 million %
Medallion Cooling Systems, has total assets of $10,900,000, EBIT of $1,990,000, and preferred dividends of $205,000and is taxed at a rate of 40%.In an effort to determine the optimal capital structure, the firm has assembled data on the cost of debt, the number of shares of common stock for various levels of indebtedness, and the overall required return on investment: Capital structure debt ratio Cost of debt, rd Number of common stock shares Required return, rs 0% 0% 198,000 12.1% 15 7.9 171,000 13.2 30 8.9 141,000 13.8 45 12.1 107,000 16.1 60 14.9 76,000 20.1 a. Calculate earnings per share for each level of indebtedness. Debt Ratio 0% EBIT $ 1,990,000 Less: Interest $ EBT $ Taxes @40% $ Net profit $ Less: Preferreddividends $ Profits available to common stockholders $…
ces NoNuns Companies has a 21 percent tax rate and has $350 million in assets, currently financed entirely with equity. Equity is worth $37 per share, and book value of equity is equal to market value of equity. Also, let's assume that the firm's expected values for EBIT depend upon which state of the economy occurs this year, with the possible values of EBIT and their associated probabilities as shown below: State Probability of state Expected EBIT in state Recession 0.25 $ 5 million EBIT Average 0.55 $ 10 million Boom 0.20 $ 17 million The firm is considering switching to a 20-percent-debt capital structure, and has determined that it would have to pay an 8 percent yield on perpetual debt in either event. What will be the break-even level of EBIT? Note: Round intermediate calculations. Enter your answer in dollars not millions and round your final answer to the nearest whole dollar amount.
Intermountain Resources is a multidivisional company. It has three divisions with the following betas and proportion of the firm’s total assets: Division Beta Proportion of Assets Natural gas pipelines 0.60 40% Oil and gas production 0.90 30 Oil and gas exploration 1.30 30 The risk-free rate is 10 percent, and the market risk premium is 9 percent. What is the firm’s weighted average beta? Round your answer to two decimal places. What required equity rate of return should the firm use for average-risk projects in its natural gas pipeline division? Round your answer to one decimal place. % What required equity rate of return should the firm use for average-risk projects in its oil and gas exploration division? Round your answer to one decimal place. %
Manshuk
Kimberly-Clark, a household product manufacturer, reported earnings per share of $3.20 in 1993, and paid dividends per share of $1.70 in that year. The firm reported depreciation of $315 million in 1993, and capital expenditures of $475 million. (There were 160 million shares outstanding, trading at $51 per share.) This ratio of capital expenditures to depreciation is expected to be maintained in the long term. The working capital needs are negligible. Kimberly-Clark had debt outstanding of $1.6 billion, and intends to maintain its current financing mix (of debt and equity) to finance future investment needs. Assume that the firm is in steady state, and earnings per share, dividends per share, and free cash flow to equity per share are all expected to grow 7% a year. The stock had a beta of 1.05. The treasury bond rate is 6.25% and the market risk premium is 5.50%. A. Estimate the value per share, using the Dividend Discount Model. B. Estimate the value per share, using the FCFE Model.…
Pellagia is a nationwide retail chain specializing in women’s apparel. The company has 135 million shares outstanding, 30 percent of which are publicly traded with a current market price of $5.63 per share. The company is expected to earn a net income of $38 million in the next twelve months. Forecast sales and EBITDA are $633 million and $57 million, respectively. Debt outstanding is $120 million. What is the current enterprise value of Pellagia?
Home Demo reports the following: Total liabilities = $38,633 million and Total assets = $42,966 million.(a) Compute Home Demo’s debt ratio.(b) Assuming Lows Hardware (a competitor) has a debt ratio of 60%, which company has higher risk from financial leverage?
Raddus is a technology company and has an enterprise value of $100 million. It currently has $25 million in debt and $5 million in cash. Current estimates for FY1 EBITDA and FY2 EBITDA are $20 million and $30 million, respectively. Company A’s industry is currently growing EBITDA at 10%. The median EV/EBITDAFY1 multiple is 5x. Company A is currently growing EBITDA at 20%. Using this data, what price do you think this company should be trading at?
Mid-States is a multi-divisional utility company. Mid-States has fourdivisions with the following betas and proportions of the firm's totalassets:Division Beta % of AssetsElectric & Gas 0.75 45Bus transportation 1.21 20Real estate 2.80 25Recreation 1.85 10The risk-free rate is 2 percent and the return on the stock market as awhole is 15%. If Mid-States is considering a residential development,what should the firm use as its cost of equity in evaluating this project?
I need help with question is solutions
MPI Incorporated has $6 billion in assets, and its tax rate is 35%. Its basic earningpower (BEP) ratio is 11%, and its return on assets (ROA) is 6%. What is MPI’s timesinterest-earned (TIE) ratio?

SEE MORE QUESTIONS

Recommended textbooks for you

Financial Reporting, Financial Statement Analysis…

Finance

ISBN:

9781285190907

Author:

James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

Financial Reporting, Financial Statement Analysis…

Finance

ISBN:

9781285190907

Author:

James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:

Cengage Learning

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SEE MORE TEXTBOOKS