E3.8. A Stab at Equity Valuation Using Multiples: Automobiles The exercise applies the method of comparables. It also introduces you to the calculation of P/E and price-to-book ratios and the effects of dividends on both. (a) 1992 P/B 1993 P/B 2.2 4.
E2.2. Applying Accounting Relations: Balance Sheet, Income Statement and Equity Statement a. Liabilities = Assets Shareholder's equity = $400 - $250 = $150 million b. Net Income = Revenues Expenses $30 = ? - $175 ? = $205 million c. Ending equity =
E5.4. Residual Earnings Valuation and Target Prices (Easy) This problem applies the residual earnings model and its dividend discount equivalent. Develop the pro forma as follows: 2006 Eps Dps Bps 2007 3.90 1.00 24.90 2008 3.70 1.00 27.60 2009 3.31 1
Buy or Sell? Value = $850 + $675 = $1,525 million Value per share = $1,525/25 = $61 Market price Therefore, BUY! = $45
E1.5. Enterprise Market Value: General Mills and Hewlett-Packard (a)
Market value of the equity = $80 Enterprise value
E4.4. Dividend Discounting and Discounted Cash Flow Analysis for a Savings Account The scenario in Box 2.2 is a "full payout" scenario. The financial statements from Box 2.2 are reproduced here. Accounting for a savings account: Earnings withdrawn (f