An investor wants to acquire a firm and is analyzing the financials of the firm. Its...

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An investor wants to acquire a firm and is analyzing the financials of the firm. Its balance sheet and income information are given as follows. Figures are in $ million. Balance Sheet Assets Cash and cash equivalents Short term marketable securities Inventories Long term marketable securities Goodwill Income information Net Sales: Cost of Sales (% of net sales): R&D (% of net sales): General costs (% of net sales): Tax rate: $100 60% 3% 7% 30% Liabilities 100 Current liabilities 30 40 Non-current liabilities 20 10 80 40 (a) What is the book equity of the firm? [1p] (b) Determine the Quick ratio of the firm. [3p] (c) Determine the gross margin, operating income and net income of the firm. [6p] The investor wants to use some simple financial multiples to obtain a rough indicator for the value of the firm. Firms competing in the same industry have a Market-to-Book (M/B) ratio of 2 and a Price-Earnings (P/E)-ratio of 8. Using the current earnings of the firm and the PE ratio, what is the suggested value of the firm? What is the value of the firm using the M/B multiple approach? [4p] An investor wants to acquire a firm and is analyzing the financials of the firm. Its balance sheet and income information are given as follows. Figures are in $ million. Balance Sheet Assets Cash and cash equivalents Short term marketable securities Inventories Long term marketable securities Goodwill Income information Net Sales: Cost of Sales (% of net sales): R&D (% of net sales): General costs (% of net sales): Tax rate: $100 60% 3% 7% 30% Liabilities 100 Current liabilities 30 40 Non-current liabilities 20 10 80 40 (a) What is the book equity of the firm? [1p] (b) Determine the Quick ratio of the firm. [3p] (c) Determine the gross margin, operating income and net income of the firm. [6p] The investor wants to use some simple financial multiples to obtain a rough indicator for the value of the firm. Firms competing in the same industry have a Market-to-Book (M/B) ratio of 2 and a Price-Earnings (P/E)-ratio of 8. Using the current earnings of the firm and the PE ratio, what is the suggested value of the firm? What is the value of the firm using the M/B multiple approach? [4p]

Answer rating: 100% (QA)

Lets break down each part of the question step by step a Book Equity of the Firm Book Equity Total A... View the full answer