Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are looking over a valuation of Sysoft, a small software company, that has had its equity valued at $ 2 billion by an investment

You are looking over a valuation of Sysoft, a small software company, that has had its equity valued at $ 2 billion by an investment bank. You notice that the analysis has applied the average price-earnings ratio of the software industry to the net income of Sysoft, which is $ 100 million, to estimate this value. You also note that Sysofts earnings are expected to grow at 15% a year, while the industrys earnings are expected to grow at 10% a year. Based upon its higher expected growth rate, you believe that Sysoft should have a PEG ratio that is 1.25 times the average PEG ratio for the software industry. Based upon this estimate what would should the value of Sysoft to be?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Capital Failure Rebuilding Trust In Financial Services

Authors: Nicholas Morris , David Vines

1st Edition

0198712227,019102077X

More Books

Students also viewed these Finance questions

Question

Show the properties and structure of allotropes of carbon.

Answered: 1 week ago