Business, 25.04.2020 03:13 superfly903

7. Becker Products is a manufacturer and distributor of numerous food products. The company has a book value of $19.15 per share. Becker Products is part of the food processing industry which has an industry PB ratio of 3.15. Using industry information, estimate the intrinsic value of Becker Products’ equity per share?

Answers: 3

Show answers

Answers

Answer from: roger93

$60.32

Explanation:

The intrinsic value of a company is the theoretical value of any company and is essentially the price that investors would want to pay given the level of risk associated with an investment in the company. Intrinsic value is calculated commonly from an investment appraisal standpoint whereby an investor may determine whether a stock is undervalued or overvalued or an investor may put a price on a stock that is not openly traded. There are multiple approaches towards calculating intrinsic value. The most comprehensive approaches are the ones that solely focus on "company centric" factors such as sales levels, cash flows, costs, discount rates and so on and so forth. This is commonly known as the discounted cash flow model in which you calculate the present value of all future cash flows of the company. Since this model is complicated to use, there are other approaches to calculate sort of a "back of the hand" intrinsic value. An example of such an approach is the relative/comparative valuation approach in which you calculate the price an investor would be willing to pay using examples of other similar instruments that an investor has made and assuming that a similar price would be paid for this investment as well.

The question at hand refers to a method known as the comparable company analysis in which an industry ratio is used to derive the price of Becker Products. So, the Price to Book value for the industry is given as 3.15 for the industry. Using comparative analysis we will assume that this ratio is the same for Becker (since it operates in the same industry and this is the industry average so the actual ratio should be close to the average). Formula for calculating PB is PB = Price per Share/Book Value per share. We have PB as 3.15 and Book Value per Share as 19.15. Re-arranging the formula becomes, Price per Share = PB x Book Value per Share = 3.15 x 19.15 = $60.32.

So we can estimate that, relative to the industry, the equity per share can be estimated as $60.32 per share which is the price investors would be willing to pay for the level of risk in the company.

Again, this is simply an estimation of the intrinsic value. Not the actual intrinsic value since the factors involved are external and industry specific. Discounted cash flows methods are better adopted to calculate the intrinsic value.

Answer from: Quest

rational decision making is a multi-step process for making choices between alternatives. the process of rational decision making favors logic, objectivity, and analysis over subjectivity and insight. the word “rational” in this context does not mean sane or clear-headed as it does in the colloquial sense.

hope this

Answer from: Quest

the answer is d

brainliest! ?

Another question on Business

Business, 22.06.2019 04:50

Problem 9-5. net present value and taxes [lo 1, 2] penguin productions is evaluating a film project. the president of penguin estimates that the film will cost $20,000,000 to produce. in its first year, the film is expected to generate $16,500,000 in net revenue, after which the film will be released to video. video is expected to generate $10,000,000 in net revenue in its first year, $2,500,000 in its second year, and $1,000,000 in its third year. for tax purposes, amortization of the cost of the film will be $12,000,000 in year 1 and $8,000,000 in year 2. the company’s tax rate is 35 percent, and the company requires a 12 percent rate of return on its films. required what is the net present value of the film project? to simplify, assume that all outlays to produce the film occur at time 0. should the company produce the film?

Answers: 2

Answer

Business, 23.06.2019 00:30

Which of the following emails should he save in this folder instead of deleting or moving it to another folder

Answers: 1

Answer

Business, 23.06.2019 06:10

The a/p clerk of a company writes the checks for vendors, and the controller signs the checks. the a/p clerk hasdevised a plan to give herself a raise. she creates a new vendor for her friend's business and creates two purchaseorders for random car detailing services for $75 and $70. she writes the checks to pay these new vendors knowing thecontroller will only pay close attention to checks over $100. she delivers the checks to her friend to deposit in his bankaccount, and then he writes her a personal check for the full amount of $145.ceventually, what will be the effect of her actions? what can the company do to prevent this type of behavior? due mondav

Answers: 1

Answer

Business, 23.06.2019 08:00

Whom do progressive taxes assess? a. only a large percentage of high-income households b. only a large percentage of organizations c. a large percentage of high-income households and organizations d. a large percentage of low-income households e. a small percentage of high-income households

Answers: 1

Answer

You know the right answer?

7. Becker Products is a manufacturer and distributor of numerous food products. The company has a bo...

Questions