You are assigned to determine a fair value for AdvBioTech (ABT) Corporation. You determined that market multiples approach would be the best method to determine a fair value for this company. The total asset value of the company is 600 million dollars and the liability is 400 million dollars. The company has 25 million shares outstanding. ABT also generated 400-million-dollar-revenue in the current year. In a typical year, company's return on equity is 16 percent. You gathered the following three multiples from a close competitor of ABT. The P/E (Price-Earnings) ratio is 48, Price to sales (P/S) is 4, and price to book (P/B) ratio is 6. Based on information given about ABT and its competitor, determine the value of ABT using market multiples approach. Based on your analysis, what is the fair value of ABT using P/S multiple?
You are assigned to determine a fair value for AdvBioTech (ABT) Corporation. You determined that market multiples approach would be the best method to determine a fair value for this company. The total asset value of the company is 600 million dollars and the liability is 400 million dollars. The company has 25 million shares outstanding. ABT also generated 400-million-dollar-revenue in the current year. In a typical year, company's return on equity is 16 percent. You gathered the following three multiples from a close competitor of ABT. The P/E (Price-Earnings) ratio is 48, Price to sales (P/S) is 4, and price to book (P/B) ratio is 6. Based on information given about ABT and its competitor, determine the value of ABT using market multiples approach. Based on your analysis, what is the fair value of ABT using P/S multiple?
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:You are assigned to determine a fair value for
AdvBioTech (ABT) Corporation. You determined
that market multiples approach would be the best
method to determine a fair value for this company.
The total asset value of the company is 600 million
dollars and the liability is 400 million dollars. The
company has 25 million shares outstanding. ABT
also generated 400-million-dollar-revenue in the
current year. In a typical year, company's return on
equity is 16 percent. You gathered the following
three multiples from a close competitor of ABT. The
P/E (Price-Earnings) ratio is 48, Price to sales (P/S)
is 4, and price to book (P/B) ratio is 6. Based on
information given about ABT and its competitor,
determine the value of ABT using market multiples
approach. Based on your analysis, what is the fair
value of ABT using P/S multiple?
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