Question 3 (4 points) You are valuing Polk, a privately owned electronics company. The firm had net income of $55 million on revenue of $600 million in Year 0, and its net income is expected to grow 12% p.a. from Year 1 to Year 5. The unlevered beta of electronics companies is 0.90, and Polk has no debt. The correlation of publicly traded electronics companies with the market is 45%. You have run a regression of electronics companies against fundamentals and have come up with the following equation: P/E0 = 9.5 + 52.5*(Expected income growth p.a. next 5 years) - 5.0*(Beta) Note: Expected income growth rate should be entered in decimal form. a. Estimate the equity value of Polk in an initial public offering. (2 points) b. Estimate the market value of equity of Polk, assuming that you are selling the company to a private individual who is not diversified. (2 points) Question 3 (4 points) You are valuing Polk, a privately owned electronics company. The firm had net income of $55 million on revenue of $600 million in Year 0, and its net income is expected to grow 12% p.a. from Year 1 to Year 5. The unlevered beta of electronics companies is 0.90, and Polk has no debt. The correlation of publicly traded electronics companies with the market is 45%. You have run a regression of electronics companies against fundamentals and have come up with the following equation: P/E0 = 9.5 + 52.5*(Expected income growth p.a. next 5 years) - 5.0*(Beta) Note: Expected income growth rate should be entered in decimal form. a. Estimate the equity value of Polk in an initial public offering. (2 points) b. Estimate the market value of equity of Polk, assuming that you are selling the company to a private individual who is not diversified. (2 points)