Consider the following two similar-sized companies, Muinch and Redrid, operating in the same sector and enjoying...
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Consider the following two similar-sized companies, Muinch and Redrid, operating in the same sector and enjoying the same outlook for the future with the following features: Company (all values are in €) Muinch Operating income 160 - Interest expense - Corporate income tax (40%) -Net profit Market Capitalization Value of debt (rp=10%) 30 52 78 1,800 300 Redrid 177 120 23 34 229 1333 1.200 a) What is the market capitalization of Redrid? b) If you decided to evaluate the value of Redrid using the multiples method, what are the implicit assumptions of this method? Consider the following two similar-sized companies, Muinch and Redrid, operating in the same sector and enjoying the same outlook for the future with the following features: Company (all values are in €) Muinch Operating income 160 - Interest expense - Corporate income tax (40%) -Net profit Market Capitalization Value of debt (rp=10%) 30 52 78 1,800 300 Redrid 177 120 23 34 229 1333 1.200 a) What is the market capitalization of Redrid? b) If you decided to evaluate the value of Redrid using the multiples method, what are the implicit assumptions of this method?
Expert Answer:
Answer rating: 100% (QA)
a The market capitalization of Redrid can be calculated using the net profit multiple PricetoEarnings or PE ratio and is given by the formula Market C... View the full answer
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Posted Date:
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