Q11. An analyst has gathered the following fundamental data:
|
|
Firm A |
Firm A |
Firm B |
Firm B |
|
Strategy |
High Margin |
Low Margin |
High Margin |
Low Margin |
|
Payout Ratio |
40% |
40% |
40% |
40% |
|
Required Rate of Return |
11% |
11% |
11% |
11% |
|
Growth Rate in Dividends |
9% |
5% |
5% |
7% |
|
Sales/Book Value of Equity |
1.5 |
4.5 |
1.0 |
3 |
|
Profit Margin |
10% |
2% |
9% |
4% |
|
Book Value |
$150 |
$150 |
$125 |
$125 |
What is the price-to-sales (P/S) multiple for Firm A in the high-margin, low-volume strategy?
A) 2.00.
B) 2.18.
C) 0.13.
Q12. What is the P/S multiple for Firm B in the low-margin, high-volume strategy?
A) 0.60.
B) 0.43.
C) 2.00.
Q13. 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.
Q14. The following data was available for Morris, Inc., for the year ending December 31, 2001:
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) 0.109.
C) 0.114.
Q15. An analyst has gathered the following data about the Garber Company:
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.
Q16. An analyst has gathered the following fundamental data:
|
|
Firm A |
Firm B |
Firm C |
Firm D |
|
Payout Ratio |
75% |
|
|
|
|
Required Rate of Return |
12% |
12% |
12% |
12% |
|
Return on Equity (ROE) |
20% |
15% |
30% |
14% |
|
Price/Book Value (PBV) Ratio |
|
3.00 |
0.70 |
3.50 |
What is the PBV ratio for Firm A?
A) 1.25.
B) 2.14.
C) 0.71.
Q17. (Note: CVR, Inc., has a book value of equity of $80 and a required rate of return of 10%. Home, Inc., has a book value of equity of $100 and a required rate of return of 11%.)
If CVR, Inc., has a required return for shareholders of 10%, what is its appropriate leading price-to-sales (P/S) multiple if the firm undertakes the high margin/low volume strategy?
A) 1.46.
B) 0.20.
C) 0.80.
Q11. An analyst has gathered the following fundamental data:
|
|
Firm A |
Firm A |
Firm B |
Firm B |
|
Strategy |
High Margin |
Low Margin |
High Margin |
Low Margin |
|
Payout Ratio |
40% |
40% |
40% |
40% |
|
Required Rate of Return |
11% |
11% |
11% |
11% |
|
Growth Rate in Dividends |
9% |
5% |
5% |
7% |
|
Sales/Book Value of Equity |
1.5 |
4.5 |
1.0 |
3 |
|
Profit Margin |
10% |
2% |
9% |
4% |
|
Book Value |
$150 |
$150 |
$125 |
$125 |
What is the price-to-sales (P/S) multiple for Firm A in the high-margin, low-volume strategy?
A) 2.00.
B) 2.18.
C) 0.13.
Q12. What is the P/S multiple for Firm B in the low-margin, high-volume strategy?
A) 0.60.
B) 0.43.
C) 2.00.
Q13. 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.
Q14. The following data was available for Morris, Inc., for the year ending December 31, 2001:
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) 0.109.
C) 0.114.
Q15. An analyst has gathered the following data about the Garber Company:
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.
Q16. An analyst has gathered the following fundamental data:
|
|
Firm A |
Firm B |
Firm C |
Firm D |
|
Payout Ratio |
75% |
|
|
|
|
Required Rate of Return |
12% |
12% |
12% |
12% |
|
Return on Equity (ROE) |
20% |
15% |
30% |
14% |
|
Price/Book Value (PBV) Ratio |
|
3.00 |
0.70 |
3.50 |
What is the PBV ratio for Firm A?
A) 1.25.
B) 2.14.
C) 0.71.
Q17. (Note: CVR, Inc., has a book value of equity of $80 and a required rate of return of 10%. Home, Inc., has a book value of equity of $100 and a required rate of return of 11%.)
If CVR, Inc., has a required return for shareholders of 10%, what is its appropriate leading price-to-sales (P/S) multiple if the firm undertakes the high margin/low volume strategy?
A) 1.46.
B) 0.20.
C) 0.80.
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