Question
Allgent Corp. has two divisions. Division A captures 10 percent of industry sales, forecast to be $50 million. Division B will capture 30 percent of
Allgent Corp. has two divisions. Division A captures 10 percent of industry sales, forecast to be $50 million. Division B will capture 30 percent of its industry's sales, which expected to be $20 million. Allgent's division A has traditionally had a 5 percent net income margin, and division B has had an 8 percent net-income margin. Allgent has 300,000 shares of common stock outstanding which sell at $30. If you require at least a 20 percent, one-year return, and you expect the P/E to be 10 next year, would you purchase Allgent common at this time based on your one-year forecast?
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