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Valuation concepts: Mikrotek's enterprise value, market cap

1.With its shares trading at $75.25 on December 31, 2007, the market capitalization of Mikrotek's common equity was $135.45 billion. Mikrotek listed $25 billion of debt on its most recent balance sheet, and sales for year 2007 were $81 billion.

A. How many common shares were outstanding?
B. What value was the market placing on Mikrotek's enterprise value?
C. Mikrotek listed 150 million shares in treasury stock on its balance sheet. As such, how many shares in total did Mikrotek issue there?
D. As of today, January 2, 2008, an analyst forecasts that Mikrotek's
stock dividends per share will be $2.09 in 2008, $2.25 in 2009, and expects dividends to grow at a rate of 7% per year indefinitely after that. Investors require a return of at least 10% for Mikrotek's stock. Please value this stock and recommend a "buy" or "sell" decision.


Solution Preview

A. Common shares outstanding = Market capitalization of common equity / Share price = 135.45 billion / 72.25

B. Enterprise Value = Value of equity + Value of Debt = ...

Solution Summary

This post explains in step by step manner the concepts of valuation by solving a problem. The concepts discussed include, market capitalization, enterprise value, value of equity, buy/sell recommendations, etc.