Question
In: Accounting
Mr Jhon who is a CFO of your company asks you to compute intrinsic value of...
Mr Jhon who is a CFO of your company asks you to compute intrinsic value of ABC Ltd. The pertinent financial information about ABC Ltd. are presented below:
|
2009 |
2010 |
2011 |
2012 |
2013 |
|
|
Net income (loss) |
($3,600) |
($1,040) |
$10,736 |
$8,928 |
$10,978 |
|
Beginning book value of equity (1.1.2009) |
60,000 |
||||
|
Ending Book value |
? |
? |
? |
? |
? |
Additional information:
1- Expected dividend payment is $6,000 per year for all the future years
2- Cost of equity is 10%
3- The current stock price is $10.50 per share with 10,000 shares outstanding.
Required
1-Calculate ABC Ltd.’s abnormal earnings for each of the years from Year 2009 to Year 2013. Use the abnormal earnings model to estimate the intrinsic value of the company.
20The current stock price is $10.50 per share with 10,000 shares outstanding. Critically evaluate whether the firm’s stock is undervalued/overvalued.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
Mr Sultan who is a CFO of your company asks you to compute intrinsic value of...
Mr Sultan who is a CFO of your company asks you to compute
intrinsic value of ABC Ltd. The pertinent financial information
about ABC Ltd. are presented below:
2009
2010
2011
2012
2013
Net income (loss)
($3,600)
($1,040)
$10,736
$8,928
$10,978
Beginning book value of equity (1.1.2009)
60,000
Ending Book value
?
?
?
?
?
Additional information:
1- Expected dividend payment is $6,000 per year for all the
future years
2- Cost of equity is 10%
3- The...
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