Verified Document

Eight Questions About Valuing Companies

Related Topics:

Investment Valuation The value of ABV's equity per share can be calculated as follows. First, calculate the value of the operating assets, so EBITDA less the tax rate, adjusted downward for the reinvestment rate and then multiplied by the perpetual growth rate. This is then divided by the cost of capital less the growth rate:

To this, the cash should be added, the debt subtracted to get the value of the equity:

And this is divided by the number of shares 200 million, to give an earnings per share of:

If there are equity options on the shares, then those options would be subtracted from the share value. The value of the options is 50 * 5 = $250 million. This is then subtracted from the equity value above 799.90-250.00 = 599.90

And this is then divided by the number of shares outstanding

599.90 / 200 = $3.00

With the treasury stock approach, the first step is to calculate the exercise proceeds from the options: 6 * 50 = $300 million.

Then the Treasury Stock value per share has to be calculated:

= (Value of Equity + Exercise proceeds) / (# of shares + # of options)

= (799.9 + 300) / (200 + 50)...

First, the enterprise value should be calculated: Me = $25 billion, Md = $5 billion = Market value of $30 billion. Less the cash ($3 billion) = enterprise value of $27 billion.
The cost of capital is calculated using the WACC = 12.5 (25/30) + 5 (5/30) = 11.25%

Then the following step can be used:

Enterprise Value = EBIT (1-t)(1-Reinvestment rate) (1+g)(r-g)

27000 = EBIT (1-.3)(1-.06/.15)(.1125/.06)

EBIT = $3,184 million.

5. a. You would expect to see $1.2 billion in EBIT in the consolidated statement, reflecting the EBITs of both of these companies. .

b. 400 (1-.4)(1+.11)/(.10-.05) = $5,328 million

This is for 100% of the equity. The 50% stake is worth $2,664

c. 400(1-.4)(1+.15)(.09-.05) = $6,900, which divided by two is $3,450 million

6. First, there is the value of Genome Sciences:

300(1.06)(1-.4)/(.12-.06) = $3,180 million

Then there is the value of Gene Therapies:

(100 * .50) * 10% = $500

So the combined is $3,680, then the debt must be subtracted: $3,680-800 = $2,880 million

Then…

Cite this Document:
Copy Bibliography Citation

Related Documents

Strategic Planning for Training Companies
Words: 16101 Length: 55 Document Type: Term Paper

" Of these respondents, over 50% of them stated that they lack a disaster recovery plan (Anthes, 1998). However, most of the problems stem from the lack of communication at the corporate level. (Hawkins, et al., 2000). Business Continuity Plans (BCP) and other forms of strategic planning are no longer a luxury, but a must-have factor and an important element of any organisation's risk management system. Organisations are increasingly dependent upon

Historic Process by Which Strategic
Words: 5396 Length: 20 Document Type: Essay

Concerning employment practices in general, the order not only strictly prohibited discrimination in hiring, but it also entered into the lexicon the now commonplace idea of Equal Opportunity Employment and established the premise of Affirmative Action. In doing so, this order would also explicit the prohibition of discriminatory treatment of employees once hired, seeming to build a legal case for those who would argue that a compensation system demonstrates

Strategic Management Practices and Bahamian
Words: 5122 Length: 13 Document Type: Literature Review

Culture is no small force; it shapes individuals and impacts tremendously on politics (McCartney, 2004). Nations are made up of people, who, from the moment of their birth, are deeply and profoundly shaped by the cultures and customs from whence they came (McCartney, 2004). Because history and culture are two such inseparable animals, it's worthwhile to take a brief look at the history of the Bahamas. Brief History Many history scholars believe

Customer Relationship Management Strategy
Words: 4756 Length: 17 Document Type: Term Paper

Customer relationship management (CRM) is an essential component of organizational management. The purpose of this discussion is to focus on a CRM strategy for United Behavioral Health a subsidiary of United Health Care . . United Behavioral Health is dedicated to presenting customers with high quality, cost-effective, managed mental health and substance abuse services to its customers. The investigation suggests that the company's core values have been successfully implemented into

Leadership in International Schools
Words: 29649 Length: 108 Document Type: Term Paper

Leadership Skills Impact International Education CHALLENGES OF INTERNATIONAL EDUCATION Practical Circumstances of International schools THE IMPORTANCE OF LEADERSHIP IN EDUCATION What is Effective Leadership for Today's Schools? Challenges of Intercultural Communication Challenges of Differing Cultural Values Importance of the Team Leadership Style LEADERSHIP THEORIES Current Leadership Research Transformational Leadership Skills-Authority Contingency Theories APPLYING LEADERSHIP IN AN INTERNATIONAL SETTING Wagner's "Buy-in" vs. Ownership Understanding the Urgent Need for Change Research confirms what teachers, students, parents and superintendents have long known: the individual school is the key unit

Switch to IAS/IFRS: The Challenge
Words: 10455 Length: 38 Document Type: Term Paper

Some mergers and acquisitions (M&as) did not generate any goodwill because they were accounted for using the pooling-of-interests method. In 1969, Leonard M. Savoie (then Executive Vice President of the AICPA) stated that he expected the then-prevailing accounting pronouncement authority, the Accounting Principles Board (APB), to abolish the pooling of interests method. However, the death-knell for this accounting method was not sounded until 2001 with the issuance of SEAS

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now