Calculate the estimated value per share

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Management at Winters Co. is trying to establish a share price for each of the following companies that are potential targets for a takeover: Grand Co. Try Co. Net assets $30,000,000 $42,000,000 Current net income 11,000,000 14,000,000 Number of shares outstanding 5,500,000 7,500,000 Current total annual dividends $ 2,915,000 $ 3,675,000 The industry average for the price-earnings (P/E) ratio is 2.3, and the required rate of return on the shares of each company is estimated at 12%.

Required: Calculate the estimated value per share for Grand Co. and Try Co. using the following methods:

a) Discount dividend model

b) P/E ratio method

Reference no: EM133062591

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