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Assume a company has a payout ratio of 42 percent, a profit margin of 7 percent,...

Assume a company has a payout ratio of 42 percent, a profit margin of 7 percent, a cost of equity of 15 percent and a growth rate of 3.5 percent. Do not round intermediate calculations. Round your answers to three decimal places.

What is the forward price–sales multiple?

What is the trailing price–sales multiple?

Solutions

Expert Solution

1.

We know that,

Forward Price Sales multiples = Profit margin * payout /(r -g)

= 0.07 * 0.42/(0.15 - 0.035)

=0.2556 Answer

2.

Trailing Price Sales multiples = (1 + growth rate) * profit margin * payout

/(r -g)

= (1 + 0.035)*0.07*0.42/(0.15 - 0.035)

= 0.2646 Answer

jeff jeffy answered 2 years ago
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