1.) You want to evaluate the fair value of a firms (firm X) shares. It has sales per share of $1.3 and book value per share of $5.2. The firm pays no dividends.

There are two comparable firms with the following information

Competitor A: total market value of $10 billion, reported sales of 1.25 billion,

book value of 1.3 billion, and no dividends.

Competitor B: total market value of $2.3 billion, reported sales of 500 million,

book value of 0.97 billion, and no dividends.

What per share price for firm X do the comparable firms imply?

a. $14.02

b. $17.17

c. Not enough information to answer the question

d. None of the above

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2.) You want to evaluate the fair value of a firms (firm X) shares. It has EPS of $5.5 and book value per share of $12 The firm pays no dividends.

There are two comparable firms with the following information

Competitor A: total market value of $2 billion, reported sales of 125 billion,

book value of 0.3 billion, and no dividends.

Competitor B: total market value of $2.6 billion, reported sales of 100 million, book value of 0.27 billion, and no dividends.

What per share price for firm X do the comparable firms imply? If the current share price for firm X is $95, would you buy these shares?

a. $115.5; buy

b. $97.68; buy

c. $106.59; buy

d. None of the above