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Question 242 pts Ketema, Incorporated is a manufacturer of electronic instruments. Use the following information on Ketema and five other similar companies to value Ketema,
Question 242 pts
Ketema, Incorporated is a manufacturer of electronic instruments. Use the following information on Ketema and five other similar companies to value Ketema, Incorporated on December 31, 2021.
Ketema, Incorporated, 2021 ($ millions) | |
Net income | $ 66.10 |
---|---|
Number of common shares (millions) | 32.82 |
Earnings before interest and tax | $ 112.30 |
Tax rate | 22% |
Book value of equity | $ 335.10 |
Book value of interest-bearing debt | $ 470.80 |
Comparison of Ketema, Incorporated with Comparable Companies | ||||||
Ketema | Aloha Electric | Butler Electric | AJ Smith | Baker Modesto | National Power | |
---|---|---|---|---|---|---|
Growth Rates, Financial Risks, Size | ||||||
5-year growth rate in sales (%) | 3.3 | 6.8 | 1.4 | 8.1 | 10.2 | 15.2 |
5-year growth rate in EPS (%) | 5.1 | 1.3 | 9.2 | (5.4) | 19.6 | 3.4 |
Interest coverage ratio (X) | 4.8 | 8.0 | 38.0 | 3.0 | 12.3 | * |
Total liabilities to assets (X) | 0.7 | 0.6 | 0.4 | 0.7 | 0.5 | 0.1 |
Total assets ($ millions) | 1,029 | 15,046 | 196 | 1,294 | 585 | 1,421 |
Indicators of Value | ||||||
Price/earnings (X) | 23.2 | 16.1 | 32.0 | 12.4 | 25.0 | |
MV firm/EBIT(1Tax rate) (X) | 23.3 | 16.2 | 34.7 | 13.2 | 25.0 | |
MV equity/BV equity (X) | 3.9 | 3.5 | 1.0 | 2.1 | 2.3 | |
MV firm/BV firm (X) | 2.7 | 3.3 | 1.0 | 1.8 | 2.3 | |
Price/sales (X) | 1.5 | 1.4 | 0.4 | 1.0 | 2.0 | |
MV firm/sales (X) | 1.9 | 1.4 | 0.8 | 1.1 | 2.0 |
*National Power has no interest-bearing debt outstanding.
MV = Market value; BV = Book value. MV firm is estimated as book value of interest-bearing debt + market value of equity.
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