Question

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43. Oliver Learning is a retailer focused on education supplies. The company has a book value of $43.98 per share. Oliver Learning has a PB ratio of 8.80 and the education supplies industry PB ratio is 6.46. Assuming that comparable industry companies are priced correctly the intrinsic value of Oliver Learning's equity per share is: A) Undervalued $102.91 per share B) Overvalued $102.91 per share C) Priced correctly D) Overvalued by $43.98 per share 14. The following table provides summary information for Max Corp. and its competitors Bernhard, Inc. and Eva Co. Use the information to compute the net income multiple for Bernhard and Eva. In addition, using Bernhard and Eva as comparables, compute Max's equity intrinsic value and equity intrinsic value per share. Max Company assumed value Equity assumed value NOPAT Net income Net nonoperating obligations Common shares outstanding $140,584 138,024 215,648 13,289 Bernhard $667,964 408,990 65,456 60,304 258,974 15,584 Eva $948,663 805,408 102,841 97,853 143,255 5,745

Answer 1

ANSWER

13)

B. Overvalued $102.91 per share

Intrinsic value equals book value per share multiplied by the industry PB ratio.

The intrinsic value would be compared to the current price.

= $43.98 × (8.80 - 6.46)

= $43.98 × 2.34

= $102.91 per share

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