Intrinsic value of fairfield learning equity per share

Assignment Help Financial Management

Reference no: EM131851689

Fairfield Learning is a retailer focused on education supplies. The company has a book value of $28.88 per share. Fairfield Learning has a PB ratio of 6.32 and the education supplies industry PB ratio is 5.31. Assuming that comparable industry companies are priced correctly the intrinsic value of Fairfield Learning's equity per share is:

Undervalued $26.57 per share

Overvalued $26.57 per share

Overvalued $29.17 per share

Priced correctly

2. Which of the following is(are) false regarding capital structure and debt?

I. At first, debt costs are small, but expected costs of debt increase as leverage rises.

II. The M&M Theory suggests that in a world with taxes, capital structure doesn't matter.

III. Firm value is maximized when D/E reaches about 35% to 45%, then begins to decline as leverage threatens the cash flow of the firm.

IV. In general, debt has a higher cost than equity for a corporation.

a. Only I and II are false

b. Only II and III are false

c. Only III and IV are false

d. Only II and IV are false

e. Only I and IV are false

Reference no: EM131851689

Questions Cloud

Compute the present value of payments made in years : Given a 6 percent interest rate, compute the present value of payments made in years 1, 2, 3, and 4 of $1,850, $2,150, $2,150, and $2,250.

You need to invest each year to make the required donation : How much do you need to invest each year to make the required donation? How much will that professor be paid at the end of the first year of the endowment?

What is the equivalent value of this series at the beginning : What is the equivalent value of this series at the beginning of 2041?

Capital for its new state-of-the-art manufacturing facility : TDJ Corp. needs $6.4 million in capital for its new state-of-the-art manufacturing facility. Current financing plan is 45% equity capital and 55% debt financing

Intrinsic value of fairfield learning equity per share : Assuming that comparable industry companies are priced correctly the intrinsic value of Fairfield Learning's equity per share is:

Discuss several common tactics used by ambush marketers : What are some of the ways that public capital can better address the gaps in venture funding? Discuss several common tactics used by ambush marketers.

What rate would legally have to be quoted : A local finance company quotes an interest rate of 15.4 percent on one-year loans. What rate would legally have to be quoted? What is the effective annual rate?

Call option on the australian dollar : Calculate the profit or loss for an investor who purchased a call option on the Australian Dollar with a strike price of $0.7528/AUD

Series of end-of-year CFs spanning the same time period : What is the equivalent uniform amount for a series of end-of-year CFs spanning the same time period?

User Account

All Pages