Reference no: EM132948734

Problem 1 - An investor was offered by an existing stockholder to purchase his shares from Camacho Corp at Php46.00 per share. The outstanding shares of the company is 1 Million. The Year 1 revenue is Php5 Million and expected to constantly grow by 5%. The EBITDA margin remains to be stable at 50%. The required rate of return is 10%. Their outstanding loans is Php17 Million.

a. How much is the value of the shares? Are you going to accept the offer?

b. How much is the value of the shares if the there is no loans outstanding?

c. Are you going to accept the offer if the required return is 12%? Why?

Problem 2 - Quinzel Inc. has projected net cash flows from operations at Php45 Million on the first year. In order to realize the 10% growth for the next 4 years, Jabel purchased CAPEX amounting to Php250 Million within the first year. Half of the CAPEX was funded by liability and no other long term liability was existing before the purchase on the first year.

a. For its five-year projection, determine Jabel's discounted net cash flow to the firm assuming a discount rate of 7.5%.

b. For its five-year projection, determine Jabel's net cash flow to equity assuming a discount rate of 7.5%.

Problem 3 - Below are Listed financial industry players has the following market value and earnings per share:

Naki Inc.

Market Value per share: 46.50

Earnings per share: 5.00

P/E Ratio: ?

Baka Co.

Market Value per share: 45.24

Earnings per share: 6.03

P/E Ratio: ?

Wego Co.

Market Value per share: 16.25

Earnings per share: 2.18

P/E Ratio: ?

Aries Inc.

Market Value per share: 25.11

Earnings per share: 3.72

P/E Ratio: ?

Reina Corp.

Market Value per share: 34.32

Earnings per share: 4.29

P/E Ratio: ?

An analyst is looking into the performance of Friendly Inc. in the same industry but is not listed, the company reported earnings of Php1.25 per share.

a. Compute for the P/E Ratio each firm.

b. How much is the value of the subject firm?

Problem 4 - Freddie Inc.'s statement of financial position as of December 31, 2019 reported the following:

Asset Php400 Million; Liabilities Php100 Million; Equity Php300 Million with common outstanding shares of 10 Million and 10% Preference shares of 5 Million. The Freddie's stock is already selling at Php37 per share.

a. How much is the Book-to-Market Ratio?

b. What is the market value of Freddie?

Problem 5 - Lizzie Co. declared dividends of Php2 per share for their performance last year after the declaration of dividends the market value per share increased to Php45 per share.

a. What is the dividend yield ratio of Lizzie Co?