You are analyzing the illiquid stock of a small enterprise, QT Company. In their recently published accounting data they report that the Book Value of Equity is $48,500,000 and they have 22,020,000 shares outstanding. You have decided to compare QT to a close competitor BXZ, Inc., which sells in the market for $6.26 per share. The Book Value of Equity for BXZ is $62,700,000 and they have 37,000,000 shares outstanding. Use the Market-to-Book Ratio for BXZ to make a reasonable estimate of the share price for QT. $3.73 $4.84 $8.14 $19.42

You are analyzing the illiquid stock of a small enterprise, QT Company. In their recently published accounting data they report that the Book Value of Equity is $48,500,000 and they have 22,020,000 shares outstanding. You have decided to compare QT to a close competitor BXZ, Inc., which sells in the market for $6.26 per share. The Book Value of Equity for BXZ is $62,700,000 and they have 37,000,000 shares outstanding. Use the Market-to-Book Ratio for BXZ to make a reasonable estimate of the share price for QT. $3.73 $4.84 $8.14 $19.42

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

See similar textbooks

Similar questions

You have been hired by Orange Brewery to help manage its captial structure. Currently, Orange has 671 million shares outstanding with a share price of $72.51, and $24.91 billion in debt. How much debt must Orange have if the expected future growth causes Orange to have 710 million shares outstanding trading for $87.19 per share. Assume that Orange maintains a constant debt-equity ratio. The amount of debt required for the new share price and shares outstanding will be___? billion. (Round to two decimal places.)
Amarindo, Inc. (AMR), is a newly public firm with 9.0 million shares outstanding. You are doing a valuation analysis of AMR. You estimate its free cash flow in the coming year to $14.58 million, and you expect the firm's free cash flows to grow by 3.9% per year in subsequent years. Because the firm has only been listed on the stock exchange for a short time, you do not have an accurate assessment of AMR's equity beta. However, you do have beta data for UAL, another firm in the same industry: AMR has a much lower debt-equity ratio of 0.45, which is expected to remain stable, and its debt is risk free. AMR's corporate tax rate is 20%, the risk-free rate is 5.2%, and the expected return on the market portfolio is 10.8%. a. Estimate AMR's equity cost of capital. b. Estimate AMR's share price. a. Estimate AMR's equity cost of capital. The equity cost of capital is%. (Round to two decimal places.) Data table (Click on the following icon in order to copy its contents into a spreadsheet.)…
BQ, Incorporated, is considering making an offer to purchase iReport Publications. The vice president of finance has collected the following information: BQ iReport Price-earnings ratio 12.2 8.8 Shares outstanding 1,500,000 165,000 Earnings $ 4,600,000 $ 680,000 Dividends $ 960,000 $ 410,000 BQ also knows that securities analysts expect the earnings and dividends of iReport to grow at a constant rate of 4 percent each year. BQ management believes that the acquisition of iReport will provide the firm with some economies of scale that will increase this growth rate to 6 percent per year. a. What is the value of iReport to BQ? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What would BQ’s gain be from this acquisition? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. If BQ were to offer $36 in cash for each share of iReport, what would the…
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely.
Help
You are trying to estimate the intrinsic value of the shares of Flying High Ltd, a manufacturer of unmanned aerial vehicles, or drones. The company is headquartered in Melbourne, and sells its drones throughout Australia and New Zealand. It is a public company, but is not yet listed on the stock exchange. There are 30,000 shares outstanding. The most recent dividend was $2.6. The required rate of return for equity is 18.97%. Book value of equity, per share, as at 31 December 2021 was $25.97. You have come up with the following forecasts: - Earnings are expected to grow at 3.9% in perpetuity. - The firm's Return on Equity is expected to remain constant at 23.46%. What is the estimated value of the shares using a Residual Income Discount Model? a. $33.71 b. $32.51 c. $31.68 d. $32.00
Winston Sporting Goods is considering a public offering of common stock. Its investment banker has informed the company that the retail price will be $18.40 per share for 670,000 shares. The company will receive $16.75 per share and will incur $225,000 in registration, accounting, and printing fees. 1. What is the spread on this issue in percentage terms? 2. What are the total expenses of the issue as a percentage of the total value (at retail)?
Baker Industries’ net income is $26000, its interest expense is $5000, and its tax rate is 45%. Its notes payable equals $25000, long-term debt equals $70000, and common equity equals $260000. The firm finances with only debt and common equity, so it has no preferred stock. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet What are the firm’s ROE and ROIC? Round your answers to two decimal places. Do not round intermediate calculations.
After unexpectedly hosting an event for an out-of-favour political candidate, Four Seasons Total Landscaping expects to see its profits steadily decline each year going forward. Having recently paid its annual dividend of $$21.2521.25 per share, shares of Four Seasons Total Landscaping currently trade at a market price of $$77.0277.02 each. After analysing its business, you determine that the appropriate cost of equity capital for the firm is 18.118.1% per annum due to relatively high levels of fixed costs and debt financing. Based on the above information, at what rate per annum does the market seem to believe that the dividends of Four Seasons Total Landscaping will decrease? The annual dividends are expected to decline in size by % per annum.(Round to FOUR decimal places)

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS