M3 You are assigned to determine a fair value forAdvBioTech (ABT) Corporation. You determinedthat market multiples approach would be the bestmethod to determine a fair value for this company.The total asset value of the company is 600 milliondollars and the liability is 400 million dollars. Thecompany has 25 million shares outstanding. ABTalso generated 400-million-dollar-revenue in thecurrent year. In a typical year, company's return onequity is 16 percent. You gathered the followingthree multiples from a close competitor of ABT. TheP/E (Price-Earnings) ratio is 48, Price to sales (P/S)is 4, and price to book (P/B) ratio is 6. Based oninformation given about ABT and its competitor,determine the value of ABT using market multiplesapproach. Based on your analysis, what is the fairvalue of ABT using P/S multiple?

Market multiples approach It is a valuation method based on the assumption that similar firms have…

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?
You are working for an imports-exports company. In the current financial year, your company has a net income of $851,000 and plans to use a part of it as retained earnings for a new project which will cost $500,000 next year. The company's stock is currently listed and actively traded on ASX. Required: a) Calculate the amount of net income available for the company to pay dividends to current shareholders if it maintains a capital structure of 46% in debt funding and 54% in equity funding, assuming residual dividend theory applies. b) Your company is going to pay an annual dividend of $5 per share and extra dividend of $2 per share in 4 weeks. The standard process of settlement in ASX is T+2. If tomorrow is the ex-dividend date, when is the record date for dividend payment? calculate the ex-dividend price if today's market price is $43.5, given the dividend tax rate is 13%. c) Your company needs to make a payment of AUD 245,000 to a partner in Tokyo. If the direct…
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
Macon Mills is a division of Bolin Products. Inc. During the most recent year, Macon had a net income of $40 million. Included in the income was interest expense of $2,800,000. The companys tax rate was 40%. Total assets were $470 million, current liabilities were $104,000,000, and $72,000,000 of the current liabilities are noninterest bearing. What are the invested capital and ROI for Macon?
Mr. Park presented its projected net sales of 30,000,000.00 to the Board as part of the business analysis of its newest SKU. IN the presentation, it was determined that the COGS/COS from last year's income statement is 76% based on the vertical analysis. The gross profic under this scenario is ______.
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…
You are working for an imports-exports company. In the current financial year, your company has a net income of $851,000 and plans to use a part of it as retained earnings for a new project which will cost $500,000 next year. The company’s stock is currently listed and actively traded on ASX. Required: Your company is going to pay an annual dividend of $5 per share and extra dividend of $2 per share in 4 weeks. The standard process of settlement in ASX is T+2. If tomorrow is the ex-dividend date, when is the record date for dividend payment? calculate the ex-dividend price if today’s market price is $43.5, given the dividend tax rate is 13%.
D&G Textile company is evaluating two different operating structures. Data about those structures are shown below. Annual interest expense of the firm is $200, it has common shares outstanding of 2,000, and a tax rate of 20 percent.
While conducting a valuation study of Cross Corp for the annual update for the Trustees of the ESOP plan that owns a portion of the firm, you determine that the Terminal Value of the firm, at the end of a four-year Planning Period, is $120,070 (all $s in 000s). The firm’s capital structure is 30% debt and 70% equity, the cost of debt is 4%, and the cost of equity is 12%. The firm has a 24% tax rate. If the Present Value of Planning Period Cash Flows is $72,100, the Enterprise Value for Cross is: a. $72,100 b. $148,407 c. $156,194 d. $192,170 e. None of the above
Alex Morgan LLC's Chief Financial Officer, Mackenzie Dern, analyzed one of Morgan's competitors. She found that the competitor had Average Invested Capital of $600,000 in 2021. She said the Company had FCFF of $50,000; FCFE of $40,000; and that their WACC was 10.0%. She asked you what their EVA would be?
The market value of the equity of Thompson, Inc., is $582,000. The balance sheet shows $21,000 in cash and $192,000 in debt, while the income statement has EBIT of $93,000 and a total of $137,000 in depreciation and amortization. What is the enterprise value-EBITDA multiple for this company?
Currently, the Bright Ltd is an all-equity company. Earnings before interest and taxes (EBIT) for the company is expected to be $73,084 forever, and the cost of capital is currently 14.16 percent. The Chief Financial Officer (CFO) of the Bright Ltd Company is interested to identify the cost of capital and value of the company. The corporate tax rate applicable to this company is 34.0 percent. A). Calculate the market value of Bright Ltd. Round your answer to 2 decimal points. B). Suppose Bright Ltd floats a $30,397 debt issue and uses the proceeds to reduce share capital. The interest rate is 9.75 percent. Calculate the new value of the business. Round your answer to 2 decimal points. C). Calculate the new value of equity. Round your answer to 2 decimal points.

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