Universal Scientific Industrial's (USI) reported a net profit of RM80 million for the year 2020. The...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Universal Scientific Industrial's (USI) reported a net profit of RM80 million for the year 2020. The number of shares outstanding was 100 million units, and share capital is RM100 million. Its share are currently trading at RM8. It is expected that USI' net profit one year from now will be RM160 million. USI has continued to expand and has expected that in year 2040, its net profit will be RM320 million given other things being constant. Assume that USI's pricelearnings (P/E) ratio remains at its current level. USI has treasury shares of RM80 million, retained earnings of RM1,420 million as at 31 December 2020. Required: (a) Calculate Universal Scientific Industrial's stock price one year from now. (6 marks) (b) Assuming that Universal Scientific Industrial's net profit grows to RM320 million in year 2040 with other things remaining constant, calculate the company's Compound Annual Growth Rate (CAGR). (4 marks) Using the CAGR in part (b) above and PE ratio obtainable above, determine whether the stock price that you have calculated in part (a) above is undervalued or overvalued. (6 marks) (c) (d) Calculate the Price - to - Book value ratio for USI for year 2020, and based on the answer (4 marks) [Total: 20 marks] you have calculated, determine whether USI is undervalued or overvalued. Universal Scientific Industrial's (USI) reported a net profit of RM80 million for the year 2020. The number of shares outstanding was 100 million units, and share capital is RM100 million. Its share are currently trading at RM8. It is expected that USI' net profit one year from now will be RM160 million. USI has continued to expand and has expected that in year 2040, its net profit will be RM320 million given other things being constant. Assume that USI's pricelearnings (P/E) ratio remains at its current level. USI has treasury shares of RM80 million, retained earnings of RM1,420 million as at 31 December 2020. Required: (a) Calculate Universal Scientific Industrial's stock price one year from now. (6 marks) (b) Assuming that Universal Scientific Industrial's net profit grows to RM320 million in year 2040 with other things remaining constant, calculate the company's Compound Annual Growth Rate (CAGR). (4 marks) Using the CAGR in part (b) above and PE ratio obtainable above, determine whether the stock price that you have calculated in part (a) above is undervalued or overvalued. (6 marks) (c) (d) Calculate the Price - to - Book value ratio for USI for year 2020, and based on the answer (4 marks) [Total: 20 marks] you have calculated, determine whether USI is undervalued or overvalued.
Expert Answer:
Answer rating: 100% (QA)
a Au calculchon corrent PIE rako S wi1 pn ce per share E arni... View the full answer
Posted Date:
Students also viewed these finance questions
-
The shares of Corines Candies Inc. are currently trading at $18.20. There are four million shares outstanding. The companys 2012 net income was $5.2 million. Find the market value of equity for the...
-
The common shares of a firm are currently trading at $10.00, while its preferred shares trade at par. Calculate the convertible premium on the preferred shares. What does this premium mean?
-
The ordinary shares of ZZZ are currently trading at 80p. The last dividend per share was 15p and its dividenads have been constant for ten years. The company plans to finance a new investment project...
-
Mount Everest is Earth's highest mountain above sea level, located in the Mahalangur Himal sub-range of the Himalayas. The ChinaNepal border runs across its summit point. Its elevation of 8,848.86 m...
-
The auditor for a fictional company, ABC Wholesaling, has just begun to perform preliminary analytical procedures as part of planning the audit for the coming year. ABC Wholesaling is in a...
-
Give the reasons why inventory is often the most difficult and time consuming part of many audits.
-
Nicholas Company manufactures basketballs and soccer balls. For both products, materials are added at the beginning of the production process and conversion costs are incurred uniformly. Nicholas...
-
Outline the traditional problems associated with the flat- file model that are resolved by the database model.
-
Accounting for a merchandising business You will refer to this worksheet as you prepare the following documents: Schedule of cost of goods sold Classified income statement Classified balance sheet...
-
Let today be November 3, 2008. (a) Use the LIBOR rate and the swap data on November 3, 2008 in Table 11.26 and fit the LIBOR curve. (b) From the LIBOR discount curve, fit the Ho-Lee model of the...
-
The Excello Company currently has a policy of paying out 30% of its earnings in dividends. Currently the market is expecting a return on equity of 10%. The firm had just paid a dividend of $1 and the...
-
Describe how to organize yourself at the end of the day. Suggest at least five ways to organize and inventory the office supplies and the workstation.
-
Wilson's Winter Woolens manufactures jackets and other wool clothing. A certain designed ski parka requires the following: Direct materials standard 2 square yards at $13.50 per yard Direct...
-
Integrative Case Study: Wellbeing Efforts at KPMG KPMG LLP is a large global organization providing audit, tax, risk and advisory services. Especially during tax season, stress and long hours are...
-
There are four to five major participants involved in taking car loans through securitization to ultimate investors. Who are each of these participants and what functions do they serve
-
Suppose you have taken over as CEO of ABC Company. You have a group of first time investors with little understanding of captial budgeting. Explain the three budgeting methods (Payback Period, NPV,...
-
Simulation Problem for MGMT 595 Extrapolation of the Growing for Broke Case (HBS Publishing) Should Paragon Acquire MonitoRobotics? ASSIGNMENT: the deliverable is a series of three spreadsheets (3)...
-
The column shown in the figure is fixed at the base and free at the upper end. A compressive load P acts at the top of the column with an eccentricity e from the axis of the column. Beginning with...
-
The income statement of Barbra Streisand Company is shown below. Additional information: 1. Accounts receivable decreased \($280,000\) during the year. 2. Prepaid expenses increased \($150,000\)...
-
George Clooney Company's income statement for the year ended December 31 2002, contained the following condensed information. Clooney s balance sheet contained the following comparative data at...
-
The financial statements of Frank B. Robinson Company appear below. Additional information: 1. Dividends declared and paid were \($3,000\). 2. During the year equipment was sold for \($8,500\) cash....
Study smarter with the SolutionInn App