Beagle Beetles engages in the development, manufacture and sale of a line of cos

Question

Beagle Beetles engages in the development, manufacture and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected info necessary to compute some valuation estamites for the firm. Assume the values provided are from year-end 2015. Also assume that the firms equity beta is 1.40, the risk free rate is 2.40%, and the market risk premium is 6.8%. Check my work Beagle Beauties engages in the development, manufacture, and sale of a line of cosmetics designed to make your dog look glamorous. Below you will find selected information necessary to compute some valuation estimates for the firm. Assume the values provided are from year-end 2015. Also assume that the firm's equity beta is 1.40, the risk-free rate is 2.40 percent, and the market risk premium is 6.8 percent. ped Dividends per share Return on equity Book value per share s3.12 12.00% $17.50 Earnings Cash Flow Sales 2015 value per share Average price multiple Forecasted growth rate s 5.90 7.05 $26.10 2.72 14.00 13.668 9.69 7.88% Using the P/E, P/CF, and P/S ratios, estimate the 2016 share price for Beagle Beauties. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Share price Using P/E ratio Using P/CF ratio Using PIS ratio

Explanation / Answer

Soln : As we have here given beta, market premium, and risk free rate.

Using the CAPM, we get discounted rate = 2.4% + 1.4*6.8 = 11.92%

in 2015 the earning per share = 5.90 and growth rate = 13.66%, So, earning in 2016 = 5.90*1.1366 = 6.705

Discounting this value by an year = 6.705/1.1192 = $6, So, price of the stock as per P/E = 14*6 = $84

Similarly for cash flow , the price = 7.066*9.69 = $68.47

For P/S the value of share price will be P = 25.16*2.72 = $68.43

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