Estimate the value to sales ratio for cheap perfume

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Reference no: EM133629988

Question

You are looking over a valuation of a Sysoft, a small software company, that has had its equity valued at $ 2 billion by an investment bank. You notice that the analysis has applied the average price earnings ratio of the software industry to the net income of Sysoft, which is $ 100 million, to estimate this value. You also note that Sysoft's earnings are expected to grow at 15% a year, while the industry's earnings are expected to grow at 10% a year. Based upon its higher expected growth rate, you believe that Sysoft should have a PEG ratio that is 1.25 times the average PEG ratio for the software industry. Based upon this estimate what would should the value of Sysoft to be?

You are trying to estimate the brand name value of Zycon Perfume and have collected the following information on Zycon and a generic perfume manufacturer, Cheap Perfume Inc.

Both firms are in stable growth, growing at 5% a year in perpetuity.

1. Estimate the value to sales ratio for Zycon.

2. Estimate the value to sales ratio for Cheap Perfume.

3. If both firms have the same book capital invested ($ 5 billion), estimate the value of Zycon's brand name.

Reference no: EM133629988

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