--Investors require an annual return of 14.0% on the stock --Shares outstanding of 200,000 --The...
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--Investors require an annual return of 14.0% on the stock
--Shares outstanding of 200,000
--The current year income statement for Trimax is below
--Comparable company (Comp 1, Comp 2, Comp 3, and Comp 4) share price and financial information is below
1) What is the yield to maturity on Trimax's bonds?
2) What is the price per share of Trimax's stock using the dividend discount model?
3) If it is reasonable to value a share of Trimax's stock at the average P/E of the comparable companies, what value would result?
4) If Trimax has a higher expected growth rate than the comparable companies, should Trimax have a higher or lower P/E ratio than the comparable companies?
Trimax
Current year
Revenue
$ 5,000,000
Share Price
Revenue
EBIT Margin
EPS
COGS
3,250,000
Gross profit
1,750,000
Comp 1
$ 25.00
$ 6,000,000
18.0%
$ 3.15
SG&A
750,000
Comp 2
33.00
7,500,000
16.0%
3.70
Depreciation
366,667
Comp 3
18.00
6,750,000
13.0%
2.25
EBIT
633,333
Comp 4
21.00
7,200,000
14.0%
3.00
Interest
100,000
Taxable Income
533,333
Taxes
133,333
Net Income
$ 400,000
Answer & Explanation
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