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标题: Reading 44: Market-Based Valuation: Price and Enterprise Val [打印本页]

作者: 土豆妮 时间: 2011-3-18 15:43 标题: [2011]Session 12-Reading 44: Market-Based Valuation: Price and Enterprise Val

Session 12: Equity Investments: Valuation Models
Reading 44: Market-Based Valuation: Price and Enterprise Value Multiples

LOS i: Calculate and interpret the justified price-to-earnings ratio (P/E), price-to-book ratio (P/B), and price-to-sales ratio (P/S) for a stock, based on forecasted fundamentals.

A firm’s return on equity (ROE) is 15%, its required rate of return is 12%, and its expected growth rate is 7%. What is the firm’s justified price to book value (P/B) based on these fundamentals?

A)
1.71.

B)
1.60.

C)
0.63.

P₀/B₀ = (ROE – g) / (r – g) = (0.15 – 0.07) / (0.12 – 0.07) = 1.60

[此贴子已经被作者于2011-3-21 11:33:54编辑过]

作者: 土豆妮 时间: 2011-3-18 15:43

What is the appropriate price-to-sales (P/S) multiple of a stock that has a retention ratio of 45%, a return on equity (ROE) of 14%, an earnings per share (EPS) of $5.25, sales per share of $245.54, an expected growth rate in dividends and earnings of 6.5%, and shareholders require a return of 11% on their investment?

A)
0.158.

B)
0.278.

C)
0.227.

Recall that profit margin is measured as E₀ / S₀. In this example, the profit margin is (5.25 / 245.54) = 0.0214. Thus:

P₀ / S₀ = [(E₀ / S₀)(1 ? b)(1 + g)] / (r ? g) = [0.0214(0.55)(1.065)] / (0.11 ? 0.065) = 0.278

作者: 土豆妮 时间: 2011-3-18 15:43

A firm’s return on equity (ROE) is 14%, its required rate of return is 10%, and its expected growth rate is 8%. What is the firm’s justified price-to-book value (P/B) based on these fundamentals?

A)
2.00.

B)
3.00.

C)
2.75.

The firm’s justified price-to-book value = (ROE – g) / (r – g) = (0.14 – 0.08) / (0.10 – 0.08) = 3.00

作者: 土豆妮 时间: 2011-3-18 15:44

What is the appropriate leading price-to-earnings (P/E) multiple of a stock that has a projected payout ratio of 40% if shareholders require a return of 15% on their investment and the expected growth rate in dividends is 5%?

A)
6.30.

B)
4.00.

C)
13.20.

P₀/E₀ = 0.40 / (0.15 – 0.05) = 4.00

Note that the leading P/E omits (1 + g) in the numerator, which is present in the formula for the trailing P/E.

作者: 土豆妮 时间: 2011-3-18 15:44

What is the appropriate justified trailing price-to-earnings (P/E) multiple of a stock that has a payout ratio of 40% if shareholders require a return of 15% on their investment and the expected growth rate in dividends is 5%?

A)
4.20.

B)
6.30.

C)
3.80.

P₀/E₀ = (0.40 × 1.05) / (0.15 – 0.05) = 4.20

作者: 土豆妮 时间: 2011-3-18 15:44

The Farmer Co. has a payout ratio of 70% and a return on equity (ROE) of 14%. What will be the appropriate price-to-book value (PBV) based on fundamentals if the expected growth rate in dividends is 4.2% and the required rate of return is 11%?

A)
1.44.

B)
0.64.

C)
1.50.

Based on fundamentals:
P/BV = (0.14 ? 0.042) / (0.11 ? 0.042) = 1.44.

作者: 土豆妮 时间: 2011-3-18 15:44

What is the justified leading price-to-earnings (P/E) multiple of a stock that has a retention ratio of 60% if the shareholders require a return of 16% on their investment and the expected growth rate in dividends is 6%?

A)
4.00.

B)
6.36.

C)
4.24.

P₀/E₁ = 0.40 / (0.16 – 0.06) = 4.00

作者: 土豆妮 时间: 2011-3-18 15:45

What is the justified trailing price-to-earnings (P/E) multiple of a stock that has a payout ratio of 65% if the shareholders require a return of 10% on their investment and the expected growth rate in dividends is 6%?

A)
9.28.

B)
16.25.

C)
17.23.

P₀/E₀ = (0.65 × 1.06) / (0.10 – 0.06) = 17.225

作者: 土豆妮 时间: 2011-3-18 15:45

A firm has a payout ratio of 40%, a profit margin of 7%, an estimated growth rate of 10%, and its shareholders require a return of 14% on their investment. Based on these fundamentals, a reasonable estimate of the appropriate price-to-sales ratio for the firm (based on trailing sales) is:

A)
0.70.

B)
0.77.

C)
0.56.

作者: 土豆妮 时间: 2011-3-18 15:46

The Lewis Corp. had revenue per share of $300 in 2001, earnings per share of $4.50, and paid out 60% of its earnings as dividends. If the return on equity (ROE) and required rate of return of Lewis are 20% and 13% respectively, what is the appropriate price/sales (P/S) multiple for Lewis?

A)
0.12.

B)
0.18.

C)
0.19.

Profit Margin = EPS / Sales per share = 4.50 / 300 = 0.015 or 1.5%.

Expected growth in dividends and earnings = ROE × (1 ? payout ratio) = 0.20 × 0.40 = 0.08 or 8%.

P₀/S₀ = [profit margin × payout ratio × (1 + g)] / (r ? g) = [0.015 × 0.60 × (1.08)] / (0.13 ? 0.08) = 0.1944.

作者: 土豆妮 时间: 2011-3-18 15:46

The following data was available for Morris, Inc., for the year ending December 31, 2001:

Sales per share = $150.
Earnings per share = $1.75.
Return on Equity (ROE) = 16%.
Required rate of return = 12%.

If the expected growth rate in dividends and earning is 4%, what will the appropriate price-to-sales (P/S) multiple be for Morris?

A)
0.037.

B)
0.114.

C)
0.109.

Profit Margin = EPS / Sales per share = 1.75 / 150 = 0.01167 or 1.167%.

Payout ratio = 1 ? (g / ROE) = 1 ? (0.04 / 0.16) = 0.75 or 75%.

P₀ / S₀ = [profit margin × payout ratio × (1 + g)] / (r ? g) = [0.01167 × 0.75 × 1.04] / (0.12 ? 0.04) = 0.11375.

作者: 土豆妮 时间: 2011-3-18 15:46

An analyst has gathered the following data about the Garber Company:

Payout Ratio = 60%.
Expected Return on Equity = 16.75%.
Required rate of return = 12.5%.

What will be the appropriate price-to-book value (PBV) ratio for the Garber Company based on return differential?

A)
0.58.

B)
1.73.

C)
1.38.

The estimated growth rate is 6.7% [0.1675 × (1 ? 0.60)] and PBV ratio based on rate differential will be:
P₀ / BV₀ = (ROE₁ ? g) / (r ? g) = (0.1675 ? 0.067) / (0.125 ? 0.067) = 1.73.

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