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Q8. Phillipe, the founder of PhilCarr Inc, asked to assess the value of equity of his company (PhilCarp Inc), a rapidly growing software firm. You have been supplied with the current levels and forecasted revenues and net income of the company for the next 3 years (all in millions): + Revenues Net Income Current Year 500 50 1 600 72 2 700 98 3 800 128 You have run a regression of PE ratios against expected revenue growth and net margin (i.e. NI/sales) across software firms in the market right now and arrived at the following: PE = 4.5 + 80 (Annual (CAGR) Revenue growth in next 3 years) + 40 (Current Net Profit margin) R2 =60% (The regression uses decimals. Net margin of 20% would enter the equation as 0.2) A. 23.4 B. 24.47 C. 17.33 D. None of the above Q8. Phillipe, the founder of PhilCarr Inc, asked to assess the value of equity of his company (PhilCarp Inc), a rapidly growing software firm. You have been supplied with the current levels and forecasted revenues and net income of the company for the next 3 years (all in millions): + Revenues Net Income Current Year 500 50 1 600 72 2 700 98 3 800 128 You have run a regression of PE ratios against expected revenue growth and net margin (i.e. NI/sales) across software firms in the market right now and arrived at the following: PE = 4.5 + 80 (Annual (CAGR) Revenue growth in next 3 years) + 40 (Current Net Profit margin) R2 =60% (The regression uses decimals. Net margin of 20% would enter the equation as 0.2) A. 23.4 B. 24.47 C. 17.33 D. None of the above

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