Wesen Corp. plan to launch NASDAQ through initial public offerings (IPO). After IPO, there will be...
Wesen Corp. plan to launch NASDAQ through initial public offerings (IPO). After IPO, there will be 500,000 shares of common stock outstanding. In the table below you could find the income statement of Wesen in last fiscal year. If the average PE ratio for the companies in the same industry is 20 and the average price-sales ratio is 5, dividend payout ratio is 0. What is the reasonable offering price? (Please explain why you use the method you choose to price the stock)
Sales 15,000,000
Cost 10,000,000
Depreciation 4,000,000
EBIT 1,000,000
Interest Exp 1,500,000
EBT -500,000
TAX 0
NI -500,000
Homework Answers
PE ratio = Price per share / Earnings per share =20 . Thus, Price per share will be 20 times the earning per share.
Since the Earnings (Net Income) is negative -500,000, price per share basis the PE ratio cannot be estimated as the share price will be in negative.
Hence, price per share can be arrived using average price - sales ratio.
Price - Sales Ratio = Price Per share / Sales per share = 5. Thus, Price per share will be 5 times the sales per share.
Sales Per share = Sales / Common Stock Outstanding = $15,000,000/500,000 = $30
Price per share = Sales Per share * 5 = $30 * 5 = $150
Thus, reasonable offering price = $150.
(There is also another alternative way to evaluate share price using Free Cash Flow Yield. Free cash flow for Wesen Corp is Net Income + Depreciation = -$500,000+$4,000,000 = $3,500,000. If the Free Cash Flow Yield of the companies in the industry can be ascertained, determining the share price basis Free Cash Flow Yield will be the most appropriate price).
Add Answer to:
Wesen Corp. plan to launch NASDAQ through initial public
offerings (IPO). After IPO, there will be...
Calculate the RATIO of the following: Marnus Inc Income Statement For the Financial Year ended 12/31/19...
Calculate the RATIO of the following:
Marnus Inc Income Statement For the Financial Year ended 12/31/19 $150,000,000 ($130,000,000) $20,000,000 12/31/18 $140,000,000 ($123,000,000) $17,000,000 $9,000,000 $10,000,000 Statement values in 000's Period Ending: Total Revenue (Net Revenue) Cost of Revenue (COGS) Gross Profit Operating Expenses Sales, General and Admin. Other Operating Items Total Operating Exp Operating Income (or loss) Interest Expense Earnings Before Tax Income Tax Net Income (or loss) $0 $0 | ($9,000,000) $11,000,000 ($1,000,000) $10,000,000 ($5,000,000) $5,000,000 ($10,000,000) $7,000,000 ($800,000)...
Calculate the ratio of the following: Marnus Inc Income Statement For the Financial Year ended 12/31/19...
Calculate the ratio of the following:
Marnus Inc Income Statement For the Financial Year ended 12/31/19 $150,000,000 ($130,000,000) $20,000,000 12/31/18 $140,000,000 ($123,000,000) $17,000,000 $9,000,000 $10,000,000 Statement values in 000's Period Ending: Total Revenue (Net Revenue) Cost of Revenue (COGS) Gross Profit Operating Expenses Sales, General and Admin. Other Operating Items Total Operating Exp Operating Income (or loss) Interest Expense Earnings Before Tax Income Tax Net Income (or loss) $0 $0 | ($9,000,000) $11,000,000 ($1,000,000) $10,000,000 ($5,000,000) $5,000,000 ($10,000,000) $7,000,000 ($800,000)...
Marnus Inc Income Statement For the Financial Year ended Statement values in 000's Period Ending: 12/31/19...
Marnus Inc Income Statement For the Financial Year ended Statement values in 000's Period Ending: 12/31/19 12/31/18 Total Revenue (Net Revenue) $150,000,000 $140,000,000 Cost of Revenue (CoGS) ($130,000,000) ($123,000,000) $20,000,000 $17,000,000 Gross Profit Operating Expenses Sales, General and Admin. $9,000,000 $10,000,000 $0 $0 Other Operating Items Total Operating Exp ($9,000,000) ($10,000,000) $11,000,000 $7,000,000 Operating Income (or loss) Interest Expense ($1,000,000) ($800,000) $10,000,000 $6,200,000 Earnings Before Tax ($4,000,000) ($5,000,000) Income Tax Net Income (or loss) $5,000,000 $2,200,000 12/31/19 12/31/18 Dividends declared...
Determine the weighted average cost of capital (WACC) for each of the Table 1
Determine the weighted average cost of capital (WACC) for each of the Table 1 Pacific Technology COMPANY Balance Sheet 12/31/2005 Assets Liability & Equity Cash $6,000,000 Account Payable $1,000,000 Account Receivable $8,000,000 Notes Payable $3,000,000 Inventory $3,000,000 Accrued Taxes $1,000,000 Current Asset $17,000,000 Current Liabilities $5,000,000 GFA $40,000,000 Long-term debt $10,000,000 Accumulated Depreciation ($2,000,000) Preferred Stock (0.5 million shares) $15,000,000 Net Fixed Assets $38,000,000 Common Stock (1 million shares) $10,000,000 Returned Earnings $15,000,000 Common Equity $25,000,000 Total Asst $55,000,000 Total...
Question 3. The quarterly investors call is approaching and you were asked to comment on the EPS ...
Question
3. The quarterly investors call is approaching and you
were asked to comment on the EPS and projected EPS based on the
growth forecast of 10%.
Compute the EPS for the FY 2018
What is the projected EPS with the same assumptions as in
Question 1?
You are a bit
skeptical of the projected 10% growth in sales and decided to look
at a much less aggressive long-run growth scenario of 3.5% growth
in sales.
What is the projected...
Carmen Corporation has the following financial statements: Table 1  
Carmen Corporation has the following financial statements: Table 1 CARMEN COMPANY Balance Sheet 12/31/2005 Assets Liability & Equity Cash $6,000,000 Account Payable $1,000,000 Account Receivable $8,000,000 Notes Payable $3,000,000 Inventory $3,000,000 Accrued Taxes $1,000,000 Current Asset $17,000,000 Current Liabilities $5,000,000 GFA $40,000,000 Long-term debt $10,000,000 Accumulated Depreciation ($2,000,000) Preferred Stock (0.5 million shares) $15,000,000 Net Fixed Assets $38,000,000 Common Stock (1 million shares) $10,000,000 Returned Earnings $15,000,000 Common Equity $25,000,000 Total Asst $55,000,000 Total Liability & Equity $55,000,000 Table 2...
12. The effect of transactions on ratios Aa Aa E You've been asked to tutor Adaira,...
12. The effect of transactions on ratios Aa Aa E You've been asked to tutor Adaira, a finance student who doesn't feel comfortable about her understanding of the relationship between a company's business activities, its financial accounts, and the company's financial ratios. To better appreciate these relationships, you've created the following exercises for Adaira to complete. The purpose of these exercises is to help Adaira (1) understand the effect of business transactions on financial statement-such as balance sheet and income...
The following trial balance was extracted from the books of G & E Production Company Ltd...
The following trial balance was extracted from the books of G & E Production Company Ltd on 31 December 2018 and presented to you the Financial Accountant: Trial Balance Details/Accounts Dr $ Cr $ Purchases of direct raw materials 24,200,000 Stock of direct raw materials 1 January 2018 5,500,000 Wages paid to manufacture goods 12,000,000 Insurance 2,000,000 Electricity 1,450,000 Cash at bank 28,000,000 Accounts payable 3,500,000 Discounts 450,000 500,000 Return of direct raw materials 200,000 Cash in hand 600,000 Work-in-progress...
Starbucks Becomes a Public Company Starbucks' initial public offering (IPO) of common stock in June 1992...
Starbucks Becomes a Public Company Starbucks' initial public offering (IPO) of common stock in June 1992 turned into one of the most successful IPOs of the year. With the capital afforded it by being a public company, Starbucks accelerated the expansion of its store network. Starbucks' success helped specialty coffee products begin to catch on across the United States. Competitors, some imitating the Starbucks model, began to spring up in many locations. The Specialty Coffee Association of America predicted that...
1. You are faced with the following probability distribution: Economy Recession Below Average Average Above Average...
1. You are faced with the following probability distribution: Economy Recession Below Average Average Above Average Boom Probability 0.1 0.2 0.4 0.2 -30% -13% 8% 23% 45% B 15% -5% -10% 35% 18% 0.1 Assuming that you invest 40% of your money in A and 60% of your money in B, compute the followings (please show workings). a. Expected return for the portfolio b. Standard deviation for the portfolio c. Evaluate the risk reduction effect of the portfolio 2. The...
Calculate the RATIO of the following:
Marnus Inc Income Statement For the Financial Year ended 12/31/19 $150,000,000 ($130,000,000) $20,000,000 12/31/18 $140,000,000 ($123,000,000) $17,000,000 $9,000,000 $10,000,000 Statement values in 000's Period Ending: Total Revenue (Net Revenue) Cost of Revenue (COGS) Gross Profit Operating Expenses Sales, General and Admin. Other Operating Items Total Operating Exp Operating Income (or loss) Interest Expense Earnings Before Tax Income Tax Net Income (or loss) $0 $0 | ($9,000,000) $11,000,000 ($1,000,000) $10,000,000 ($5,000,000) $5,000,000 ($10,000,000) $7,000,000 ($800,000)...
Calculate the ratio of the following:
Marnus Inc Income Statement For the Financial Year ended 12/31/19 $150,000,000 ($130,000,000) $20,000,000 12/31/18 $140,000,000 ($123,000,000) $17,000,000 $9,000,000 $10,000,000 Statement values in 000's Period Ending: Total Revenue (Net Revenue) Cost of Revenue (COGS) Gross Profit Operating Expenses Sales, General and Admin. Other Operating Items Total Operating Exp Operating Income (or loss) Interest Expense Earnings Before Tax Income Tax Net Income (or loss) $0 $0 | ($9,000,000) $11,000,000 ($1,000,000) $10,000,000 ($5,000,000) $5,000,000 ($10,000,000) $7,000,000 ($800,000)...
Marnus Inc Income Statement For the Financial Year ended Statement values in 000's Period Ending: 12/31/19 12/31/18 Total Revenue (Net Revenue) $150,000,000 $140,000,000 Cost of Revenue (CoGS) ($130,000,000) ($123,000,000) $20,000,000 $17,000,000 Gross Profit Operating Expenses Sales, General and Admin. $9,000,000 $10,000,000 $0 $0 Other Operating Items Total Operating Exp ($9,000,000) ($10,000,000) $11,000,000 $7,000,000 Operating Income (or loss) Interest Expense ($1,000,000) ($800,000) $10,000,000 $6,200,000 Earnings Before Tax ($4,000,000) ($5,000,000) Income Tax Net Income (or loss) $5,000,000 $2,200,000 12/31/19 12/31/18 Dividends declared...
Question
3. The quarterly investors call is approaching and you
were asked to comment on the EPS and projected EPS based on the
growth forecast of 10%.
Compute the EPS for the FY 2018
What is the projected EPS with the same assumptions as in
Question 1?
You are a bit
skeptical of the projected 10% growth in sales and decided to look
at a much less aggressive long-run growth scenario of 3.5% growth
in sales.
What is the projected...
12. The effect of transactions on ratios Aa Aa E You've been asked to tutor Adaira, a finance student who doesn't feel comfortable about her understanding of the relationship between a company's business activities, its financial accounts, and the company's financial ratios. To better appreciate these relationships, you've created the following exercises for Adaira to complete. The purpose of these exercises is to help Adaira (1) understand the effect of business transactions on financial statement-such as balance sheet and income...
Starbucks Becomes a Public Company Starbucks' initial public offering (IPO) of common stock in June 1992 turned into one of the most successful IPOs of the year. With the capital afforded it by being a public company, Starbucks accelerated the expansion of its store network. Starbucks' success helped specialty coffee products begin to catch on across the United States. Competitors, some imitating the Starbucks model, began to spring up in many locations. The Specialty Coffee Association of America predicted that...
1. You are faced with the following probability distribution: Economy Recession Below Average Average Above Average Boom Probability 0.1 0.2 0.4 0.2 -30% -13% 8% 23% 45% B 15% -5% -10% 35% 18% 0.1 Assuming that you invest 40% of your money in A and 60% of your money in B, compute the followings (please show workings). a. Expected return for the portfolio b. Standard deviation for the portfolio c. Evaluate the risk reduction effect of the portfolio 2. The...
Most questions answered within 3 hours.
-
python
Define a function called print_values which takes a dictionary
object as a parameter. The function...
asked 54 minutes ago -
In Chapter 1 you created a program named Triangle in
which you displayed a seven-line triangle...
asked 50 minutes ago -
Research question: What are the differences between separately
stated and non separately stated transactions in an...
asked 1 hour ago -
By using Arduino write a code that connects two LEDs to two
push-buttons. Each button controls...
asked 2 hours ago -
Bank of America has bonds that pay a coupon interest rate of 5.5
percent and mature...
asked 3 hours ago -
Problem: Patient Fees C++
You are to write a program that computes a patient’s bill for...
asked 4 hours ago -
In a population of interest, we know that, 77% drink coffee, and
23% drink tea. Assume...
asked 5 hours ago -
Given that f(x) = e-(x-1) for x > 1, determine the following
probabilities:
a) P(X <...
asked 4 hours ago -
A mechanic pushes a 2.60 ✕ 103-kg car from rest to a speed of v,
doing...
asked 4 hours ago -
International information systems result in all of the following
except:
A. improved quality of information flow....
asked 4 hours ago -
The president of the retailer Prime Products has just approached
the company’s bank with a request...
asked 4 hours ago -
If the carrying amount is $200,000 and recoverable amount is
$205000, the impairment amount is:
Select...
asked 4 hours ago