Question
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?
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