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hjlf
3 years ago
5

Determining PB Ratio for Companies with Different Returns Assume that the present value of expected ROPI follows a perpetuity wi

th growth g (Value = Amount/ [r - g]). Determine the theoretically correct PB ratio for each of the following companies A and B. Company Net Operating Assets Equity RNOA ROE Weighted Avg. Cost of Capital Growth Rate in ROPI A $100 $100 21% 21% 10% 2% B $100 $100 14% 14% 10% 2% Round answers to two decimal places. PB Ratio Company A Answer 10 Company B Answer 0
Business
1 answer:
-Dominant- [34]3 years ago
4 0

Answer:

Pb R atio:

For company A = 2.375

For company B = 1.5

Explanation:

As per the data given in the question,

ROPI = NDA (RNOA - WACC)

For Company A 100 × (21%-10%)

For Company B 100 × (14%-10%)

Present value of ROPI = (ROPI ÷ (1+WACC)) ÷ [1-(1+g) ÷ (1+WACC)]

For Company A = (11 ÷ (1+0.10)) ÷ [1-(1+0.02) ÷ (1+0.10)]

= $137.50

For Company B = (4 ÷ (1+0.10)) ÷ [1-(1+0.02) ÷ (1+0.10)]

= $50

Market value of equity = NOA + present value of ROPI

= $100 + 137.50 = $237.50(Company A)

= $100 + $50 = $150(Company B)

Pb Ratio = Market value of equity ÷ Book value of equity

For company A = $237.50÷100 = 2.375

For company B = $150÷100 = 1.5

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3 years ago
The process of preventing exceptions from causing runtime errors is called
Molodets [167]
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3 years ago
Bob bought some land costing $16,390. today, that same land is valued at $46,817. How long has bob owned this land if the price
faltersainse [42]

Bob has to own his land for 18 years if the price is increasing at the rate of 6% per year.

Given that land was bought by Bob for $16390, the price is increasing at the rate of 6%, price of land today is $46817.

We are required to find the time for which Bob need to own the land so that the price of the land is $46817 today.

Compounding means calculating amount on the principal and the amount added interest.

Rate of increasing the price of land be 6%.

Price when Bob bought the land=$16390.

Price of land today=$46817.

It is like compounding of interest and the sum is calculated as under:

S=P*(1+r)^{n}

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46817=16390(1+0.06)^{n}

46817/16390=(1.06)^{n}

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From both the sides we will get n=18.

Hence Bob has to own his land for 18 years if the price is increasing at the rate of 6% per year.

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4 0
1 year ago
Suppose that, at an official ticket price of $480, there are 6,000 Justin Timberlake fans wanting to attend his concert, but onl
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Answer:

A. The market clearing price of the tickets is more than $480.

Explanation:

Market-clearing price is a level where the quantity demanded of a product matches or the quantity supplied. At this price, A product or service does not experience any surplus or shortages.  It is the price where the demand curve and the supply curve intersect. The market-clearing price is the same as the equilibrium price.

As the price of $480, the demand for the show is at 6000, but supply is at 4000. There is a surplus in demand. The price of $480 is attractive to more people than supply can handle. Matching supply and demand would require the price to be set above the $480.

6 0
3 years ago
Which marketing objective was used because the Fruit Bowls were new to the market?
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