Question
ARFA Chemical Manufacturing has the following Financial Information . Revenue $2,000,000 Salaries (1,000,000) Rent (500,000) Amortization (25,000) Depreciation (75,000) Earnings before Interest and Taxes (EBIT)
ARFA Chemical Manufacturing has the following Financial Information
.
| Revenue | $2,000,000 |
| Salaries | (1,000,000) |
| Rent | (500,000) |
| Amortization | (25,000) |
| Depreciation | (75,000) |
| Earnings before Interest and Taxes (EBIT) | $400,000 |
| Interest Expense | (50,000) |
| Operating Income (Earnings Before Taxes,or EBT) | $350,000 |
| Taxes | (100,000) |
| Net Income | $250,000 |
Market Value of the Firm $230 Million
Cash & Short Term Debt 0.5 Million
Debt on the Firm 45 Million
Earnings Per share $7
Stock Price $2
ZUHAIR Chemical Manufacturing has similar exactly similar financial numbers except that
Debt on Zuhair Chemicals $75 Million
Earnings Per share $9
Stock Price $23
Required :
1: As an Investment Banker, How would you value both the firms?
2: As an Investment Banker what is your verdict regarding both the firms, which one will you choose? Provide rational reasoning.
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Acca Paper 3.1 Audit And Assurance
Authors: N/a
1st Edition
075172680X, 978-0751726800
