How should a firm with natural resources be valued?
Answer to relevant QuestionsWhat is an example of a valuable asset that might not show any “value” on a balance sheet? For cyclical companies, why might the current P/E ratio be misleading? Refer to Table 7–5 on page 182. Assume that because of unusually bright long-term prospects, analysts determine that Johnson & Johnson’s P/E ratio in 2011 should be 10 percent above the average high J&J P/E ratio for the ...Assume the same facts as in problem 2, but with an ERP of 9 percent. What is the new value for Ke? What does this tell you about investors’ feelings toward risk based on the new ERP? Explain why the statement of cash flows is particularly relevant in light of the fact that the accrual method of accounting is used in the income statement and balance sheet.
Post your question