What should bigco expect to pay for privco per share

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Question - BigCo's Chief Financial Officer is trying to determine a fair value for PrivCo, a non-publicly traded firm that BigCo's is considering acquiring. Several of PrivCo's competitors, Ion International, and Zenon are publicly traded. Ion and Zenon have price-to-earnings ratios of 20 and 15, respectively. The Ion's and Zenon's earnings per share are projected to grow by 10% and 15% per annual, respectively. BigCo estimates that next year, PrivCo will achieve earnings per share of $4 per share and its earnings per share is expected to grow at 20%. To gain a controlling interest in the firm, BigCo expects to pay at least a 40% premium to the firm's estimated market value. What should BigCo expect to pay for PrivCo per share?

Reference no: EM132999543

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