Question
You are trying to price a company with three divisions and have been provided with the breakdown of divisional information: Division Book Equity Net Debt
You 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
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