Firm Value/Sales P/E Ratio Sales (mil) Net income (mil) Fast Air 1.02 7.70 7,286 214 Southeastern...

Firm	Value/Sales	P/E Ratio	Sales (mil)	Net income (mil)
Fast Air	1.02	7.70	7,286	214
Southeastern Airlines	0.87	10.50	17,879	1,567
Western Skies	1.44	11.40	35,580	12,470
Northern Winds	0.73	5.80	2,023	1
East Frontiers	0.80	4.90	5,450	790
Southern Ventures	5.14	9.20	21,373	5,890
Slow Motion	1.05	9.17	10,900	-105
Sweet Tracks	1.67	5.37	12,200	2,880
Wild Adventures	10.90	44.19	1,029	357
World Horizons			11,561	2,550

Calculate the value of World Horizons using the average value-to-sales ratio of its peers
Calculate the value of World Horizons using the median P/E ratio of its peers
Which company should not be used as a comparable peer for World Horizons

Solutions

Expert Solution

a	Average	Alternative : Simple average
			A
		Firm	Value/Sales
		Fast Air	1.02
		Southeastern Airlines	0.87
		Western Skies	1.44
		Northern Winds	0.73
		East Frontiers	0.8
		Southern Ventures	5.14
		Slow Motion	1.05
		Sweet Tracks	1.67
		Wild Adventures	10.9
		Mean	2.624


		World horizon value	*=115612.624**
			30336.064	million



b	Median
		Firm	P/E Ratio
		Fast Air	7.7
		Southeastern Airlines	10.5
		Western Skies	11.4
		Northern Winds	5.8
		East Frontiers	4.9
		Southern Ventures	9.2
		Slow Motion	9.17
		Sweet Tracks	5.37
		Wild Adventures	44.19
		Median	9.17
		(using excel formula Median)


		World horizon value	*=25509.17**
			23383.5	million

c	World Adventures is not comparable peer as its Value sales and P/E are too high compared to all other companies in bracket.

I have caluclate Part A with simple average as question does not specified for weighted average. Leave a comment if otherwise or in case you have any further query. Dont forget to hit thumbs up if you feel like it.

ekkarill92 answered 1 year ago

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