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  • RV5

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    Andrianarivelo Mihoby Safidy 1820352
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    This document calculates the estimated market value (MV) of Company D using three valuation multiples: price to book value (PBV), price to sales (PS), and enterprise value to EBITDA (EV/EBITDA). It estimates Company D's MV at 278 using the average of the multiples. It also includes formulas for calculating the price to earnings (P/E) ratio based on the market price of shares (MPS) and earnings per share (EPS), as well as the determinants of the P/E multiple.

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    This document calculates the estimated market value (MV) of Company D using three valuation multiples: price to book value (PBV), price to sales (PS), and enterprise value to EBITDA (EV/EBITDA). It estimates Company D's MV at 278 using the average of the multiples. It also includes formulas for calculating the price to earnings (P/E) ratio based on the market price of shares (MPS) and earnings per share (EPS), as well as the determinants of the P/E multiple.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    11 views3 pages

    RV5

    Uploaded by

    Andrianarivelo Mihoby Safidy 1820352
    This document calculates the estimated market value (MV) of Company D using three valuation multiples: price to book value (PBV), price to sales (PS), and enterprise value to EBITDA (EV/EBITDA). It estimates Company D's MV at 278 using the average of the multiples. It also includes formulas for calculating the price to earnings (P/E) ratio based on the market price of shares (MPS) and earnings per share (EPS), as well as the determinants of the P/E multiple.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 3

    NOTE: PBDIT is the same as EBITDA

    MV/PBDIT  12.5, 16, 18 = 15.5 (16)

    MV/BV  2, 3, 3.6 = 2.88 (3)

    MV/S  1.87, 2.4, 2.25 = 2.17 (2.2)

    MV of Company D

    PBDIT multiple = 16*18 = 288

    BV multiple = 3 * 90 = 270

    Sales multiple = 2.2 * 125 = 275

    Average MV = 277.6 (278)

    PV Growth PV Growth
    Compan MPS Intrinsic Value Opportunities (A-B) = Opportunities per MPS
    y (A) (B) (EPS/Ke) (C) (C/A) EPS
    A 75 60 15 0.2 12
    B 63 47.25 15.75 0.25 9.45
    C 65 39 26 0.4 7.8
    D 70 59.5 10.5 0.15 11.9
    E 80 44 36 0.45 8.8
    P/E = MPS/EPS

    B = retention ratio(or)plowback ratio = 1-0.4 = 0.6

    Fundamental determinant of P/E multiple

    MPS/EPS = (1-B)/[r- (ROE*B)]

    Ke = 0.15

    ROE = 0.18

    Po/Et = 0.4/(0.15-(0.18 * 0.6)) = 9.52

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