Use the Following Information to Answer the Requirements Required:
A

question 33

Essay

Use the following information to answer the requirements:
$\begin{array} { | c | r | r |} \hline & \text { CompanyX } & \text { Company Y } \\\hline \text { Reparted EPS } & 1500 & 1500 \\\hline \text { EpS decampesed: } & & \\\hline \text { Permanent } & 75 \% & 65 \% \\\hline \text { Transitary } & 20 \% & 25 \% \\\hline \text { Value-irrelevant } & 5 \% & 10 \% \\\hline\end{array}$
Required:
a.Use a risk-adjusted cost of capital of 15% to calculate each firm's implied share price and earning multiples.What are the implicit share prices and earnings multiples for the two firms different?
b.Repeat requirement a.,but use a risk-adjusted cost of capital of 8% instead.

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Definitions:

Mean

The average of a set of numbers, calculated by adding all the numbers together and then dividing by the count of the numbers.

Inferential Statistics

Involves making predictions or inferences about a population based on a sample of data.

Probability

A measure of the likelihood that a particular event will occur, usually expressed as a number between 0 and 1.

Normal Distribution

A symmetrical, bell-shaped distribution of data in which most of the observations cluster around the central peak and the probabilities for values further away from the mean taper off equally in both directions.