The discounted cash flow model and the corporate valuation model are the most wi
ID: 2821937 • Letter: T
Question
The discounted cash flow model and the corporate valuation model are the most widely used valuation
techniques. Often these valuations are accompanied by market multiple analysis, which is based on the
fundamental concept that similar assets should have similar values.
Shoe Barn Inc. is a privately owned firm with few investors. Investors forecast their earnings per share (EPS) to
reach $4 this coming year. The average price-to-earnings (PIE) ratio for similar companies in the S&P 500 is 10.
What will be the estimated intrinsic value of the Shoe Barn Inc.'s stock? _______________.
Market multiple analysis is also used to calculate the value of a company, which is further used to calculate the
intrinsic value per share of the firm.
Suppose you have the information given in the following table for Company X.
EBITDA
Total value of equity
Total firm value
Year 1
EBITDA $10,200
Total value of equity $102,000
Total firm value $132,600
Year 2
EBITDA $12,200
Total value of equity $110,000
Total firm value $176,000
What is value of the entity multiple of Company X in Year 2? _______
18.76
13.00
9.02
14.43
Explanation / Answer
1)
What will be the estimated intrinsic value of the Shoe Barn Inc.'s stock
=EPS*average price-to-earnings
=4*10
=40
2)
value of the entity multiple of Company X in Year 2=176000/12200=14.43
the above is answer..
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.