Debt Outstanding and Value of a Company
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Answer 1 Net income per share $3.80
Last dividend (Do) $1.71
Growth rate (g) 8%
Discount rate (Rate of Return) 13%
Rate of return = Expected dividend + Growth rate
Current stock price
Ans a: Projected Net income for next year $4.10
Projected Dividend at 45% $1.85
Ans b: Current stock price = $36.94
Answer 2:
Projected Net income for next year $4.47
Growth rate 9%
Dividend Ratio 40%
Ans a Projected Dividend $1.79
Ans b: Current stock price = $44.73
Answer 3: Rate of Return (ROE) 18%
Dividend payout ratio 60%
Ans a Growth rate = 7.20%
Ans b: Dividend payout ratio 50%
Growth rate = 9.00%
Answer 4: Earning per share $5.00
Dividend payout ratio 35%
Last dividend $1.75
Discount rate 15%
Growth Rate Earnings Dividend Present value
Year 0 $5.00 $1.75
Year 1 25% $6.25 $2.19 $1.90
Year 2 20% $7.50 $2.63 $1.98
Year 3 8% $8.10 $2.84
Ans a: Projected dividends:
D1 $2.19
D2 $2.63
D3 $2.84
Ans b: Value of stock in year 2 = $40.50 $30.62
Ans c: Value of stock today = $34.51
In Million
Answer 5: EBITDA $370.00
Debt outstanding $670.00
No of shares outstanding 20
Value of the Company $2,035.00
(average of 5 to 6 times of EBITDA)
Less: debt $670.00
Equity Value of the Company $1,365.00
Value per share $68.25
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Solution Summary
The expert examines debt outstanding and a value of a company.
Education
- Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
- Bachelor of Commerce, West Bengal University
Recent Feedback
- "I got this feedback and I wanted to know if you can explain it to me. I noticed something within your workings which I believe is incorrect. It looks like you've mistaken the Debt ratio for the Equity Multiplier. You've done a calculation to determine Return on Equity (ROE) but if you take a look at the ratios provided for us you'll see ROE listed on the bottom line already. You can use ROE, Profit Margin and Total Asset Turnover to figure out the Equity Multiplier amount. Equity multiplier is not provided for us and we need to calculate it. I really hope this is helpful to you. "
- "Very attentive to detail. Answers are designed in easy to understand format."
- "Fast response and thorough answer"
- "thank you very much! "
- "thank you so much !!!!!!!"
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