Universal Scientific Industrialľ's (USI) reported a net profit of RM80 million for the year 2020. The number of shares outstanding was 100 million units, and share capital is RM100 million. Its share are currently trading at RM8. It is expected that USI' net profit one year from now will be RM160 million. USI has continued to expand and has expected that in year 2040, its net profit will be RM320 million given other things being constant. Assume that USI's price/earnings (P/E) ratio remains at its current level. USI has treasury shares of RM80 million, retained earnings of RM1,420 million as at 31 December 2020. Required: (d) Calculate the Price – to – Book value ratio for USI for year 2020, and based on the answer you have calculated, determine whether USI is undervalued or overvalued.
Universal Scientific Industrialľ's (USI) reported a net profit of RM80 million for the year 2020. The number of shares outstanding was 100 million units, and share capital is RM100 million. Its share are currently trading at RM8. It is expected that USI' net profit one year from now will be RM160 million. USI has continued to expand and has expected that in year 2040, its net profit will be RM320 million given other things being constant. Assume that USI's price/earnings (P/E) ratio remains at its current level. USI has treasury shares of RM80 million, retained earnings of RM1,420 million as at 31 December 2020. Required: (d) Calculate the Price – to – Book value ratio for USI for year 2020, and based on the answer you have calculated, determine whether USI is undervalued or overvalued.
Chapter4: Financial Planning And Forecasting
Section: Chapter Questions
Problem 10P
Related questions
Question
Please help me
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Fundamentals Of Financial Management, Concise Edi…
Finance
ISBN:
9781337902571
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning