13 14 You have looked at publicly traded companies in the retail and the financial services businesses and arrived at the following regressions: 15 Retail: EV/Sales 0.60 +2.5 (Pre-tax operating margin) 16 Finance: P/BV -0.80 +4.0 (Return on Equity) 17 Assume that Eclipse has no cash balance and 50 million shares outstanding, 18 The risk-free rate is 3% and the expected market risk premium is 6%. 19 The marginal tax rate is 30%. 20 21. Estimate the value of equity per shure for Eclipse Inc. 22 23 24 b. Assume that the value of equity that you compute in part (a) is a "fair" value (i.c., equal to intrinsic value), estimate the cost equity 25 that the market is using to value the equity. Assume that the firm is in stable growth, growing at 3% in perpetuity. 26 27 13 14 You have looked at publicly traded companies in the retail and the financial services businesses and arrived at the following regressions: 15 Retail: EV/Sales 0.60 +2.5 (Pre-tax operating margin) 16 Finance: P/BV -0.80 +4.0 (Return on Equity) 17 Assume that Eclipse has no cash balance and 50 million shares outstanding, 18 The risk-free rate is 3% and the expected market risk premium is 6%. 19 The marginal tax rate is 30%. 20 21. Estimate the value of equity per shure for Eclipse Inc. 22 23 24 b. Assume that the value of equity that you compute in part (a) is a "fair" value (i.c., equal to intrinsic value), estimate the cost equity 25 that the market is using to value the equity. Assume that the firm is in stable growth, growing at 3% in perpetuity. 26 27