Use the Information for the Question(s)below

question 25

Essay

Use the information for the question(s)below.
During the most recent fiscal year,KD Industries had revenues of $400 million and earnings of $30 million.KD has filed a registration statement with the SEC for its IPO.Before it is offered,KD's investment bankers would like to estimate the value of the company using comparable companies.The investment bankers have assembled the following information based on data for other companies in the same industry that have recently gone public.In each case,the ratios are based upon the IPO price.
-Based upon the price/earnings ratio,what would be a reasonable value for KD?

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Definitions:

Plantwide Overhead Rate

An overhead allocation rate that applies uniformly across an entire manufacturing plant, instead of being divided by department or activity.

Machine Hours

A measure of the amount of time a machine is operated within a given period.

Indirect Labor

Indirect labor costs refer to wages paid to employees who are not directly involved in production work, such as supervisors, maintenance workers, and other support staff.

ABC Implementation

The process of introducing Activity-Based Costing into an organization to allocate costs more accurately to products, services, and customers.