Company B\'s tax rate is higher than Company A\'s tax rate. Company B\'s sales g

Question

       Company B's tax rate is higher than Company A's tax rate.
       Company B's sales growth rate is lower than Company A's sales growth rate.
       Company B's assets-to-sales ratio is lower than Company A's assets-to-sales ratio.
       Company B's operating profit margin is lower than Company A's operating profit margin.

Question 14.14. Using the free cash flow method of valuation, an analyst determines the value of Company A's stock to be $12 and the value of Company B's stock to be $15. Other things be held constant, what could account for the higher valuation for Company B? (Points : 5)

Explanation / Answer

If assets to sales ratio of Co. B lower it means co. B has more sales in resptect to assets as compared with co. A, Hence this can be possible reason for higher valuation of Co. B.

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