Calculate the share price based upon multiple

Assignment Help Finance Basics
Reference no: EM132554368

Chemists-R-Us Ltd., a large pharmaceutical chain, had sales per share of $122 in 2019, on which it reported earnings per share of $2.45 and paid a dividend per share of $1.12. The company is expected to grow 6% in the long term and has a beta of 0.9. The current risk-free rate is 7% and the market return is 12.5%.

-Estimate the appropriate price/sales multiple for Chemists-R-Us Ltd. and calculate the share price based upon this multiple.

-You observe the shares are currently trading for $34 per share. Assuming the growth rate is estimated correctly, what would the profit margin need to be to justify this price per share?

-Given your answer to part b, do you think the market's valuation of $34 is reasonable? Explain your answer.

Reference no: EM132554368

Questions Cloud

Favorable and unfavorable leverage : What is meant by the terms "favorable" and "unfavorable" leverage? Give examples
Why are capital budgeting decisions among : Why are capital budgeting decisions among the most important decisions made by any company from recent business developments?
Critical path that project : Is there more than one critical path that a project can have? If so, what could happen under what circumstances, and what does that mean for the project manager
Baseline security requirements : What are baseline security requirements that should be applied to the design and implementation of applications, databases, systems, network infrastructure,
Calculate the share price based upon multiple : Estimate the appropriate price/sales multiple for Chemists-R-Us Ltd. and calculate the share price based upon this multiple.
What is the present value of the cost of leasing : What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Implementing security policies in organization : Implementing security policies in an organization requires separation of duties when it comes to the IT staff.
Calculate the npv for both projects : Calculate the NPV for both projects if the discount rate is 10%. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Decision modeling with spreadsheets : Decision modeling with spreadsheets is regarded as clearly the most popular end-user modeling tool.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd