The current sales for a company are $10,000,000. Analysts are forecasting an average rate of growth...

The current sales for a company are $10,000,000. Analysts are forecasting an average rate of growth in sales of 20 % per year for the next ten years. Similarly, analysts believe that the net profit margin will be about 10 % in ten years. Current shares outstanding are 2,000,000 and they are expected to stay at that level for the next ten years. The PE-multiple at the end of ten years is estimated will be 25.

a) Find the EPS for ten years from today, the selling price for ten years from today, If a required rate is estimated to be 15 %, what should be the value of this company today? What would be the total market value of the company (market cap) today?

Expert Solution


Current Sale	10,000,000
Growth	20%
Sale level in 10 years	10000000*(1+20%)^10
Sale level in 10 years	61,917,364.22
Net profit margin	10%

Net profit	6,191,736.42
No of shares	2,000,000.00

EPS	Profit/No of shares
EPS	3.10

PE	25
Share price	EPS*PE
Share price	77.40
Discount rate	15%
Share Price today	77.40/(1+15%)^10
Share Price today	19.13

Market Capitalization today	=19.13*2000000
Market Capitalization today	38,264,192.51

jeff jeffy answered 1 year ago

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