ve been asked analyze echnology es with the following information on the companies: Primary shares Company outstanding Price/share Net Income Zap Tech 100 $20 $100 InfoRock 500 $6 $150 Lo Software 80 $5 $20 pro Number of Options Outstanding Value per option 10 $10.00 80 $1.50 20 $0.50 Assuming that the three companies have the same expected growth rate in net income and share the same return on equity and cost of equity, which of the three companies would you consider the cheapest? Explain why. (20 points)
ve been asked analyze echnology es with the following information on the companies: Primary shares Company outstanding Price/share Net Income Zap Tech 100 $20 $100 InfoRock 500 $6 $150 Lo Software 80 $5 $20 pro Number of Options Outstanding Value per option 10 $10.00 80 $1.50 20 $0.50 Assuming that the three companies have the same expected growth rate in net income and share the same return on equity and cost of equity, which of the three companies would you consider the cheapest? Explain why. (20 points)
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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Transcribed Image Text:ve been asked
analyze
echnology
es
with the following information on the companies:
Primary
shares
Company
outstanding
Price/share
Net Income
Zap Tech
100
$20
$100
InfoRock
500
$6
$150
Lo Software
80
$5
$20
pro
Number of
Options
Outstanding
Value per
option
10
$10.00
80
$1.50
20
$0.50
Assuming that the three companies have the same expected growth rate in net income
and share the same return on equity and cost of equity, which of the three companies
would you consider the cheapest? Explain why. (20 points)
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