Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year-end 2015. Also assume that the firm's equity beta is 1.40, the risk-free rate is 2.05 percent, and the market risk premium is 6.1 percent. Dividends per share Return on equity Book value per share 2015 value per share Average price multiple Forecasted growth rate Using P/E ratio Using P/CF ratio Using P/S ratio $ 2.28 8.50% $17.15 Share price Earnings Cash Flow $5.20 $ 6.70 13.30 9.48 13.52% 11.510 Sales $25.75 2.44 Using the P/E, P/CF, and P/S ratios, estimate the 2016 share price for Beagle Beauties. (Do not round intermediate calculations. Round your answers to 2 decimal places.) 7.461

Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year-end 2015. Also assume that the firm's equity beta is 1.40, the risk-free rate is 2.05 percent, and the market risk premium is 6.1 percent. Dividends per share Return on equity Book value per share 2015 value per share Average price multiple Forecasted growth rate Using P/E ratio Using P/CF ratio Using P/S ratio $ 2.28 8.50% $17.15 Share price Earnings Cash Flow $5.20 $ 6.70 13.30 9.48 13.52% 11.510 Sales $25.75 2.44 Using the P/E, P/CF, and P/S ratios, estimate the 2016 share price for Beagle Beauties. (Do not round intermediate calculations. Round your answers to 2 decimal places.) 7.461

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter11: Investment Planning

Section: Chapter Questions

Problem 7FPE: Using the Value Line Investment Survey report in Exhibit 11.5, find the following information for...

See similar textbooks

Similar questions

You have been asked by your employers to demonstrate your knowledge in business valuation process, by analyzing the value of Best Group Savings and Loans Company (BGSLC). The company paid a dividend of GH¢ 250,000 this year. The current return to shareholders of companies in the same industry as BGSLC is 12%, although it is expected that an additional risk premium of 2% will be applicable to BGSLC, being a smaller and unquoted company. Compute the expected valuation of BGSLC, if: The current level of dividend is expected to continue into the foreseeable future The dividend is expected to grow at a rate 4% par into foreseeable future The dividend is expected to grow at a 3% rate for three years and 2% afterwards
You have been tasked with using the FCF model to value Julie’s Jewelry Co. After your initial review, you find that Julie’s has a reported equity beta of 1.6, a debt-to-equity ratio of .5, and a tax rate of 21 percent. In addition, market conditions suggest a risk-free rate of 5 percent and a market risk premium of 9 percent. If Julie’s had FCF last year of $49.0 million and has current debt outstanding of $123 million, find the value of Julie’s equity assuming a 4.8 percent growth rate in FCF. (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
You are going to value Lauryn’s Doll Co. using the FCF model. After consulting various sources, you find that Lauryn's has a reported equity beta of 1.4, a debt-to-equity ratio of .5, and a tax rate of 21 percent. Assume a risk-free rate of 4 percent and a market risk premium of 9 percent. Lauryn’s Doll Co. had EBIT last year of $42 million, which is net of a depreciation expense of $4.2 million. In addition, Lauryn's made $6 million in capital expenditures and increased net working capital by $1.0 million. Assume the FCF is expected to grow at a rate of 3 percent into perpetuity. What is the value of the firm? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
Garret Simpson Investments is evaluating a firm (Garp, Inc.) for recommendation to its clients and trying to evaluate the firm's current stock price. The firm is about to offer its shares to the public and had earnings last year of $2.50 a share, which the analysts believe is expected to grow by 20% next year. Similar firms in the industry are currently selling for price-earnings ratios ranging from ten to fifteen times current period earnings. However, these competitor firms are already public entities and have relatively low growth expectations for their earnings. What is your estimate of an appropriate price range for the shares of Garp? Defend your answer.
You are valuing Estelle Company, a private firm that manufactures shop tools, and you have identified several comparable firms that are publicly owned from which to calculate an estimated price-to-earnings multiple to use in your valuation. One of the comparable firms, Comp A, has a market value per share of $53.40, earnings per share for last year of $4.20 per share, a dividend for last year that was $1.10 per share, forecast earnings per share for the next year of $7.05, and a dividend that is expected to be unchanged. The forward price-to-earnings multiple for Comp A is: a. 17.2 b. 12.7 c. 9.0 d. 7.6 e. None of the above.
As a finance intern at Pork Products, Jennifer Wainwright’s assignment is to come up with fresh insights concerning the firm’s cost of capital. She decides that this would be a good opportunity to try out the new material on the APT that she learned last semester. She decides that three promising factors would be (a) the return on a broad-based index such as the S&P 500; (b) the level of interest rates, as represented by the yield to maturity on 10-year Treasury bonds; and (c) the price of hogs, which is particularly important to her firm. Her plan is to find the beta of Pork Products against each of these factors by using a multiple regression and to estimate the risk premium associated with each exposure factor. Comment on Jennifer’s choice of factors. Which are most promising with respect to the likely impact on her firm’s cost of capital? Can you suggest improvements to her specification?
You are reviewing the valuation of Vulcan Enterprises, a private business. The analyst has estimated a value of $ 2.0 million for the company, which is in stable growth and expected to grow 3% a year in perpetuity. The firm has no debt outstanding and is expected to generate an after-tax operating income of $300,000 next year; the return on capital is anticipated to be 15%. The analyst valued the company for a private-to-private transaction, and the cost of equity he estimated is correct, given that setting. (He used a total beta to estimate the cost of equity, a risk-free rate of 4%, and an equity risk premium of 5%).However, the buyer is a publicly-traded firm with diversified investors. The average R-squared across publicly traded companies in this business is 25%. Estimate the correct value of Vulcan Enterprises for sale to a public buyer.
Using the Value Line Investment Survey report in Exhibit 11.5, find the following information for Apple. What was the amount of revenues (i.e., sales) generated by the company in 2017? What were the latest annual dividends per share and dividend yield? What is the earnings per share (EPS) projection for 2019? How many shares of common stock were outstanding? What were the book value per share and EPS in 2017? How much long-term debt did the company have in the third quarter of 2018?
Hanley Limited manufactures products that capture solar energy. The company plans to list its shares on the Venture Exchange. To do so, it must meet all of the following initial listing requirements (among others): Net tangible assets must be at least $500,000. Pre-tax earnings must be $50,000. The company must have adequate working capital. Hanley has experienced significant growth in sales and is having difficulty estimating its bad debt expense. During the year, the sales team has been extending credit more aggressively in order to increase their commission compensation. Under the percentage-of-receivables approach using past percentages, the estimate is $50,000. Hanley has performed an aging and estimates the bad debts at $57,000. Finally, using a percentage of sales, the expense is estimated at $67,000. Before booking the allowance, net tangible assets are approximately $550,000. The controller decides to accrue $50,000, which results in pre-tax earnings of $60,000.…
Arden wants to invest in a fashion brand. What discount rate should she use to compute the PV of her expected cash flows from her investment? They have this data: Expected avg annual return on 3 month- 4.1% Expected avg annual return on 30 year- 4.6% Expected avg annual return on other beauty product shares- 7.2% Expected avg annual return on other fashion shares- 13.0%
In 2022, the ABC Food company has total assets of $46,690,000, cash balance of $3,875,000, sales growth of -3% (-0.03), loss indicator of 1, CFO change indicator of 0. If the manager decides to invest $325,000, does she/he overinvest or underinvest? Based on the threshold of $60,000, do you have to conduct a further investigation and why?
Raymond Reddington is a sell-side analyst for JP Morgan and covers the electronics 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: 25% dividend discount model, 40% P/E multiple, and 35% P/Book multiple. He has the following information at his disposal in his attempt to value Great Gadgets. For FY 19, Great Gadgets has $350M of liabilities and $400M in assets. Great Gadgets had $200M in sales, COGS were $115M, and SG&A expenses were $35M. Depreciation was $10M and Great gadgets paid taxes of $10M and interest on its debt of $5M. Great Gadgets has 2M shares outstanding. Great Gadgets has a beta of 0.9. The risk-free rate is 4% and the expected return of the market is 10%. Raymond expects them to issue dividends of $6, $9, and $11 in exactly 1 year, 2 years, and 3 years, respectively. After that, he expects dividends to increase by 3% per year indefinitely. Raymond…