A company has a book value of $10.40 per share. The Market Value…
Question Answered step-by-step A company has a book value of $10.40 per share. The Market Value… A company has a book value of $10.40 per share. The Market Value Added over the next 10 years is expected to be $2.70 per share, giving it terminal book value of $13.10. The cost of equity is 7%, giving a present value of the MVA of $1.37. The expected market price of the share at the end of the tenth year is expected to be 1.8 times the book value. What is the value of the share using a multi-stage RIM?Note: This looks like a complicated question, but don’t panic. Think about it. The value of the share is the book value at the start plus the present value of the Market Valued Added in Stage 1, plus the present value of the terminal value, which is the present value of Stage 2. In this case the terminal value is based on a premium comprised of the excess of market value over book value at the beginning of Stage 2. You have been given the PV of the MVA ($1.37). So you just need to calculate the terminal value, discount to a present value, and add it to the BV at the start and the PV of the MVA. a.$17.90b.$18.90c.$18.20d.$17.10 QUESTION:At the end of 2019 a company had $159,000 in debt and $476,000 in shareholders’ equity. It has a WACC of 16.3% and earned a Net Operating Profit After Tax of $297,000 in 2020. What was its Economic Value Added in 2020? a.$219232b.$193297c.$193495d.$219412 QUESTION:A company has an operating profit or EBIT of $745,000 in 2019 and paid interest totalling $52,000. It’s tax rate is 30%. What is it’s Net Operating Profit After Tax? a.$485,000b.$524,000c.$537,000d.$472,000 QUESTION:A company has a book value per share of $26.60 at the end of 2019. Its EPS in 2020 is $7.59. Its beta is 1.2, the risk-free rate is 2.22% and the equity risk premium is 5.52%. What is the company’s residual income in 2020? a.$5.74b.$4.24c.$6.74d.$5.24 Business Accounting FINANCE FIN2SEV Share QuestionEmailCopy link Comments (0)
