Q8. Phillipe, the founder of PhilCarr Inc, asked to assess the value of equity of...
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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
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