An investor has estimated that next year's sales for Pagoda Hotel will be RM100 million. Pagoda...

 

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An investor has estimated that next year's sales for Pagoda Hotel will be RM100 million. Pagoda Hotel has 5 million shares outstanding. It generates a net profit margin of about 10%, and has a dividend payout ratio of 50%. Interest expense is RM10 million, taxes RM10 million, depreciation RM15 million, and amortisation about RM5 million. All amounts are expected to remain the same next year. Required: With the above information, calculate the following: (a) Estimated net earnings for next year. (3 marks) (b) Next year's dividends per share. (3 marks) (c) The expected price of the stock (assuming the P/E ratio is 24.5 times of earnings). (3 marks) (d) The expected total return in percentage (latest stock price: RM40 per share). (3 marks) (e) The expected price - to - cash – flow ratio for next year. (4 marks) (f) The expected price of the stock two years from now, if you the stock is trading at about 8 times its projected cash flow per share. Determine whether the stock is undervalued or overvalued (assume that the market price of the share two years from now is RM50 per share). (4 marks) An investor has estimated that next year's sales for Pagoda Hotel will be RM100 million. Pagoda Hotel has 5 million shares outstanding. It generates a net profit margin of about 10%, and has a dividend payout ratio of 50%. Interest expense is RM10 million, taxes RM10 million, depreciation RM15 million, and amortisation about RM5 million. All amounts are expected to remain the same next year. Required: With the above information, calculate the following: (a) Estimated net earnings for next year. (3 marks) (b) Next year's dividends per share. (3 marks) (c) The expected price of the stock (assuming the P/E ratio is 24.5 times of earnings). (3 marks) (d) The expected total return in percentage (latest stock price: RM40 per share). (3 marks) (e) The expected price - to - cash – flow ratio for next year. (4 marks) (f) The expected price of the stock two years from now, if you the stock is trading at about 8 times its projected cash flow per share. Determine whether the stock is undervalued or overvalued (assume that the market price of the share two years from now is RM50 per share). (4 marks)

Answer rating: 100% (QA)

a Estimated Net earnings Sales RM 100 million Net ... View the full answer