Question
ou are trying to price a company with three divisions and have been provided with the breakdown of divisional information: Division Book Equity Net Debt
ou are trying to price a company with three divisions and have been provided with the breakdown of divisional information: Division Book Equity Net Debt EBIT (1-t) Net Income Telecommunications $ 750.00 $ 750.00 $ 150.00 $ 120.00 Technology $ 750.00 $ 250.00 $ 150.00 $ 135.00 Financial Services $ 500.00 $ 1,000.00 NA $ 80.00 You have run sector regressions (with percentages entered as decimals, i.e., 15% as 0.15) are arrived at the following: Telecommunications EV/Invested Capital = 0.95 + 1.5 (Return on Invested Capital) Technology EV/Invested Capital = 1.45 + 2.0 (Return on Invested Capital) Financial Services Price/Book Value of Equity = 0.8 +2.5 (Return on Equity) Estimate the price of equity in this company, based upon how the sectors are priced. Question 3 options: $ 2,000 $ 2,867 $ 2,925 $ 3,000 $ 4,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started