You are assigned to determine a fair value for General Intelligence (GI) Corporation. Youdetermined that market multiples approach would be the best method to determine a fairvalue for this company. The total asset value of the company is 1100 million dollars and theliability is 200 million dollars. The company has 25 million shares outstanding. Gl alsogenerated 990-million-dollar-revenue in the current year. In a typical year, company's returnon equity is 14 percent. You gathered the following three multiples from a close competitor ofGI The P/E (Price-Earnings) ratio is 23, Price to sales (P/S) is 3.8, and price to book (P/B) ratio is5.5. Based on information given about Gl and its competitor, determine the value of Gl usingmarket multiples approach. Based on your analysis, what is the fair value of Gl using P/Smultiple?

To determine the fair value of General Intelligence (GI) Corporation using the market multiples…

Answered: You are assigned to determine a fair…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter12: Balanced Scorecard And Other Performance Measures

Section: Chapter Questions

Problem 3PA: Macon Mills is a division of Bolin Products. Inc. During the most recent year, Macon had a net...

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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 800 million dollars and the liability is 500 million dollars. The company has 20 million shares outstanding. ABT also generated 500-million-dollar-revenue in the current year. In a typical year, company's return on equity is 20 percent. You gathered the following three multiples from a close competitor of ABT. The P/E (Price-Earnings) ratio is 25, Price to sales (P/S) is 3, and price to book (P/B) ratio is 4. 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/E multiple?
For fiscal year 2021, Costco Wholesale Corporation ( COST) had a net profit margin of 2.60%, asset turnover of 3.24, and a book equity multiplier of 3.28. a. Use this data to compute Costco's ROE using the DuPont Identity. b. If Costco's managers wanted to increase its ROE by 1.10 percentage points, how much higher would their new asset turnover need to be? c. If Costco's net profit margin fell by 1.10 percentage points, by how much would their asset turnover need to increase to maintain their ROE? a. Use this data to compute Costco's ROE using the DuPont Identity. Costco's ROE is %. (Round to two decimal places.) If Costco's net profit margin fell by 1.05 percentage points, by how much would their asset turnover need to increase to maintain their ROE?
ABC and DEF are firms in the waste management business. Their EV/ EBITDA ratios, using estimates for next year's EBITDA, are 23 and 25, respectively. XYZ a comparable company has estimated EBITDA of $300 million next year, Debt of $200M, and cash of $10 million, and 100 million shares outstanding. What is value of one share of XYZ? a. $72.4 b$70.1 c. $69.9 d. $73.9
In the previous problem, suppose you believe that sales in five years will be $45.5 million and the price-sales ratio will be 2.15. What is the share price now? Previous problem You have looked at the current financial statements for J&R Homes, Co. The company has an EBIT of $3.35 million this year. Depreciation, the increase in net working capital, and capital spending were $295,000, $125,000, and $535,000, respectively. You expect that over the next five years, EBIT will grow at 15 percent per year, depreciation and capital spending will grow at 20 percent per year, and NWC will grow at 10 percent per year. The company has $19.5 million in debt and 400,000 shares outstanding. After Year 5, the adjusted cash flow from assets is expected to grow at 3.5 percent indefinitely. The company’s WACC is 8.6 percent, and the tax rate is 22 percent. What is the price per share of the company’s stock?
Petal Providers Corporation, described in Problem 1, is interested in estimating its sustainable sales growth rate. Last year revenues were $1 million, the net profit was $50,000, the investment in assets was $750,000, payables and accruals were $100,000, and equity at the end of the year was $450,000 (i.e., beginning of year equity of $400,000 plus retained profits of $50,000). The venture did not pay out any dividends and does not expect to pay dividends for the foreseeable future. A. Estimate the sustainable sales growth rate for Petal Providers based on the information provided in this problem. B. How would your answer in Part A change if economic growth is average and Petal Providers’ net profit margin is 7 percent?
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 $…
Metlock Enterprises is capitalized 40% with debt and 60% with equity. Its average debt rate is 7%, and its average equity rate is 9%. Metlock's best-performing segment earned operating income of $204,000 using invested capital of $1,270,000. The company's tax rate is 22%. Calculate this segment's EVA this year. EVA $ 54980 If its EVA last year was $37,000 based on the same WACC and the same asset base, how much after-tax operating income did it earn last year? After-tax operating income 181000
XYZ Ltd., experts a net income of $150,000. The company has 10% of 500,000 debentures. The equity capitalization rate of the company is 10%. (a) Calculate the value of the firm and overall capitalization rate according t the net income approach (ignore income tax). (b) If the debenture debt is increased to $750,000 and interest of debt is change to 9%. What is the value of the firm and overall capitalization rate?
1) Jorge is a sell-side analyst for Wells Fargo and covers the oil and gas industry. Based on his experience, he believes the appropriate way to model the intrinsic value of companies in this industry is the following weighted average: 60% dividend discount model, 25% P/E multiple, and 15% P/Sales multiple. He has the following information at his disposal in his attempt to value LIND industries. For FY 19, LIND has $300M of assets and $250M liabilities. LIND had $200M in sales, paid taxes of $10M and interest on its debt of $5M. SG&A costs were $30M and depreciation amounted to half of the SG&A costs. The cost of goods sold was 60% of sales. LIND has 400,000 share outstanding. The appropriate discount rate for LIND is 9%. Jorge expects them to issue dividends of $11, $17, and $25 in exactly 1 year, 2 years, and 3 years, respectively. After that, Jorge expects dividends to increase by 6% per year indefinitely. Jorge notes that the average P/E ratio for those in the oil and gas…
The following year-end data pertain to Adan Corporation: Earnings before interest and taxes 800,000 Current assets 800,000 Non-Current assets 3,200,000 Current Liabilities 400,000 Non-current liabilities 1,000,000 Adan corporation pays an income tax rate of 30%. Its weighted average cost of capital is 10%. What is Adan corporations Economic value added (EVA)?
We are going to explore the differences between two different companies, both from the same sector, firms A and B. They differ in their reinvestment abilities. Firm A and Firm B are both financed with equity only. At the end of their business year, both firms report $1,000m in revenue. The net income is $200m for both firms. Assume that management is able to maintain a constant net profit margin of 20%. • Firm A is capable of achieving 8% revenue growth annually by investing 27% of their net income. . Firm B is capable of achieving 8% revenue growth annually by investing 40% of their net income. Assume that this difference persists into the future. a) Find the value of firms A and B. Use a discount rate of 16% for both firms. Value of firm A in millions: Value of firm B in millions: b) The forward P/E ratio of a company is the price of a share divided by next year's earnings per share, or its value divided by next year's earnings. What is the forward P/E ratio of firms A and B? P/E…
For the year ended December 31, 2022, Settles Incorporated earned an ROI of 10.5%. Sales for the year were $9 million, and average asset turnover was 2.1. Average stockholders' equity was $2.8 million. Required: Calculate Settles Incorporated's margin and net income. Note: Round "Margin" answer to 1 decimal place. Enter the net income answer in dollars, i.e., $5 million should be entered as 5,000,000. Calculate Settles Incorporated's return on equity. Note: Round your answer to 1 decimal place.

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