Sara Estimated the Revenue Per Share for Firm a as $5.50

question 21

Multiple Choice

Sara estimated the revenue per share for Firm A as $5.50 and estimated the appropriate P/B ratio, P/E ratio, and P/S ratio as 1.9, 14.5, and 2.6, respectively. What is the estimated intrinsic value for Firm A?

• A) $10.45
• B) $79.75
• C) $14.30
• D) $2.12

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Definitions:

Implicit Rate

The interest rate implied in the terms of a lease or financial arrangement, often used in leasing transactions to calculate lease payments.

Economic Life

The period over which an asset is expected to be economically useful to the owner.

Warranty

A guarantee provided by a seller that a product will meet certain performance standards or an offer to repair or replace defective goods within a certain time frame.

Implicit Rate Of Return

An interest rate that equates the present value of expected future cash flows of an investment to its initial cost.