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3 years ago

The Rivoli Company has no debt outstanding, and its financial position is given by the following data:

Business

1 answer:

anzhelika [568]3 years ago

7 0

Answer:

Intrinsic value is $45

Explanation:

The starting point to determining Rivoli Company intrinsic value is to compute the earning after tax as shown below:

Earnings after tax=earning before tax*(1-tax rate)

earnings before tax is $600,000

tax rate

earnings after tax=$600,000*(1-0.25)

=$600,000*0.75

=$450,000

Then we need to compute earnings per share;

Earnings per shares=earnings after tax/weighted average number of shares

=$450,000/100,000

=$4.5

Intrinsic value=earnings per share/cost of equity

cost of equity is 10%

intrinsic value=$4.5/10%

=$45

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Answer:

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Explanation:

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valentinak56 [21]

Answer:

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