Beagle Beauties engages in the development, manufacture, and sale ofa line of cosmetics designed to make your dog look glamorous. Belowyou will find selected information necessary to compute some valuationestimates for the firm. Assume the values provided are from year-end2021. Also assume that the firm's equity beta is 1.20, the risk-free rate is2.65 percent, and the market risk premium is 7.0 percent.Dividends per shareReturn on equityBook value per share2021 value per shareAverage price multipleForecasted growth rate$ 2.269.50%$ 18.70Earnings$ 5.00Cash FlowSales$ 6.30$ 25.6513.109.532.4713.59%11.30%7.23%Using the PE, P/CF, and P/S ratios, estimate the 2022 share price forBeagle Beauties.Note: Do not round intermediate calculations. Round your answers to2 decimal places.Using PE ratioUsing P/CF ratioUsing P/S ratioShare Price

Price multiple approach is the method to find a share price, in which the previous year's price is…

Answered: Beagle Beauties engages in the…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter13: Valuation: Earnings-based Approach

Section: Chapter Questions

Problem 13PC

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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
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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.
Instructions: Assume the following data for two firms (U = unlevered firm) and (L = levered firm). Assume the two firms are in the same risk class when it comes to business risk. Both firms have EBIT = €1000 000. Firm U has zero debt and its required rate of return (KsU = 12%). Firm L has €2000 000 debt and pays 10% interest rate. Based on the data provided, answer the following questions and show all your computations and interpret your results. Find the value of unlevered (U) and levered (L) firms under zero corporate tax assumption. Find the market value of the firm’s L’s debt and equity. Do 1 and 2 under the assumption of corporate tax = 60%
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K-Life financial services Limited uses risk-adjusted return on capital (RAROC) to measure performance on several aspects. In this regard, imagine that an investment officer wants to execute a transaction with the following characteristics: Probability of default (PD) = 30 basis points Loss given default (LGD) = 55% Exposure at default (EAD) = K 1.45 million Expected loss (EL) = K 2,750 This is a loan to a company in the Agro industrial. The firm’s economic capital (EC) model is based on the 99% confidence level, with an average standard deviation of 2.15%. The risk-free rate of return is 6%. Assume that the bank has set a RAROC hurdle rate of 15% and this transaction has a net profit of K10, 500. REQUIRED: Compute the K-life’s risk-adjusted rate of return on this transaction. Now assume that K-life could also have made a loan for the same amount to a firm in the service industry, and that the standard deviation for economic capital purposes in this case is 1.29%. Compute the bank’s…
Through a simulation model, the management consultants of ZZZ Corporation estimates that the free cashflows of the to-be-acquired firms is 2,700,000. It’s forecasted operating income growth rate is 4%while its forecasted growth in net income is 5%. ZZZ requires a return on the firm at 22%. Based on those information, what is the value of the firm?

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