CO A has cash flows of $0.76 per share, earnings of $1.25 per share and 115,000 shares outstanding. Co B. is a comparable public company with a price of $60 per share, cash flows of $2.14 per share, and 510,000 shares outstanding. If Co B is a sufficiently comparable company, what do you estimate Co B. price per share to be? Assume: Risk free rate 4%
CO A has cash flows of $0.76 per share, earnings of $1.25 per share and 115,000 shares outstanding. Co B. is a comparable public company with a price of $60 per share, cash flows of $2.14 per share, and 510,000 shares outstanding. If Co B is a sufficiently comparable company, what do you estimate Co B. price per share to be? Assume: Risk free rate 4%
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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CO A has cash flows of $0.76 per share, earnings of $1.25 per share and 115,000 shares outstanding. Co B. is a comparable public company with a price of $S60 per share, cash flows of $2.14 per share, and 510,000 shares outstanding. If CoBis a sufficiently comparable company, what do you estimate Co B. price per share to be? Assume: Risk free rate 4% Market risk premium 7% Cost of debt 4%, beta of debt is 0. Tax rate 23%
Transcribed Image Text:CO A has cash flows of $0.76 per share,
earnings of $1.25 per share and 115,000 shares
outstanding. Co B. is a comparable
public company with a price of $60 per share,
cash flows of $2.14 per share, and
510,000 shares outstanding. If Co B is a
sufficiently comparable company, what do
you estimate Co B. price per share to be?
Assume:
Risk free rate 4%
Market risk premium 7%
Cost of debt 4%, beta of debt is 0.
Tax rate 23%
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