Question 4 You have been given the following information for Innovative Inc, a publicly traded software company.
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Question 4
You have been given the following information for Innovative Inc, a publicly traded software company. This
information is for next year
After-tax operating income of $ 78 million
Sales of $520 million
After-tax return on capital of 14%
Information for a median software company:
Is in stable growth, growing at 2%
50% of Innovative's operating margin
2 times the sales to capital ratio of Innovative
Median EV/Sales is 0.7 (market is fairly pricing these companies)
Innovative has same the COC and the growth rate as other software companies
a) Estimate the EV/Sales ratio for Innovative
Related Book For
Fundamental Accounting Principles
ISBN: 978-0071051507
Volume I, 14th Canadian Edition
Authors: Larson Kermit, Tilly Jensen
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