Calculate required rate of return “r and Calculate intrinsic value. [Assume or substitute Net Income for Cash Flow].

Based on the following information:

Summary Income Statement in $

Sales                5,000,000

EBIT               1,000,000

Int. Expense        40,000

EBT                   960,000

Net Income        624,000

Other Financial Information in $

Market Value of LT Debt          500,000

Market Value of Equity          4,500,000

Avg. P/E                               12x

Growth rate “g” = 0.04

Answer rating: 100% (QA)

Calculating Required Rate of Return r and Intrinsic Value Required Rate of Return r Assuming you wan... View the full answer