Main operating divisions in paper products and biotechnology

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Interco is a publicly traded firm with two main operating divisions in paper products and biotechnology. The paper division generates EBIT of $12M per year and biotech generates EBIT of $3M. Interco's shares currently trade at $10 per share, with 10M shares outstanding. Interco's CEO, Shelly, is concerned that Interco is undervalued. Comparable publicly-traded paper products firms are trading at an EV/EBIT multiple of 6. Comparable publicly-traded biotechnology firms are trading at an EV/EBIT multiple of 20. a) Assume the comparables yield insight into the true, fundamental value of Interco's operating divisions. By how much is Interco undervalued (in $)?

Reference no: EM133075642

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