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Determining the market risk premium

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The Garcia Photography Studios is trying to estimate their equity multiples based on the following information: High-growth period = 5 years, net income of $750 on sales of $5,000, with book value of equity of $2,000. During the high-growth period, the payout ratio will be 25%, and the firm's beta of 1.10, risk-freerate of 1.0% and market risk premium of 5.0% will remain constant. After the 5-year high-growth period, the growth rate in earnings will drop to 3%. Using this information, determine the company's P/E, PEG, Price toBook Value and Price to Sales ratios.

Also determine the above ratios under the following alternate scenario: HG # of Years = 7; SG rate = 2.0%

Reference no: EM133123694

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