Relative Valuation Problems

1. If the company’s EPS is projected to be Rs. 4, and peer group P/E Ratio is 10 times, If the company has issued 10
crore shares, then What would be the valuation of the company

2. 2. If a company’s shares are valued at Rs. 20 per share, and it has issued 10 crore shares, the market value of the
debt that the company has taken is Rs. 5 crore, and the company has an investment portfolio worth Rs. 3 crore.
The company also has Rs. 2 crore in the form of bank / cash. Compute Enterprise Valuation

3. 3. If the company’s EBIDTA is projected at Rs. 20 crore, and the peer group EBIDTA multiple is 20 times, then
What is the value of the company ?

4. 4. If the book value per share of the company is Rs. 15, and Price to Book Value ratio of the peer group is 3.5,
Company has 1,00,000 shares, compute the company’s value

5. 5. Suppose the sales turnover of a company is Rs. 200 crore. The peer group sales turnover is Rs. 1000 crore, and
peer group market capitalisation is Rs. 3,000 crore. What is the value of the company ?

6. 6. If A ltd has an EPS projected at Rs 6 and peer group P/E ratio is 12 times, then what would be the value of the
shares of A ltd? Assuming A ltd has 10 crore shares find the value of A ltd?
7. Capital Structure of a company has 1,00,000 fully paid equity shares of Rs 100 each. The company’s EPS for the
past 5 years are given below:

Year EPS (RS)

1 10
2 10.5
3 11
4 11.6
5 12.3
7. The Price Earnings Ratio is 10 multiple. Calculate the value of the firm?

8. 8. If the XLtd has an EBITDA projected at Rs 50 crore, and the peer group EBITDA multiple is 20 times, then what
would be the value of X ltd?

9. Calculate the enterprise value for Macy's (M). For the fiscal year ended 31st March, 2020, Macy's recorded the
following:

1 Outstanding Shares 308.5 million

2 Share Price as on 25/10/2020 $20.22
3 Short-Term Debt $309 million
4 Long-Term Debt $6560 million
5 Cash and Cash Equivalents $1300 million
 9. 10. What would be the Enterprise value of Company Y if its shares are valued at Rs 50 per share and it has issued
10 crore shares. The company has debt whose market value is Rs 10 crore and has an investment portfolio worth
Rs 5 crore. The company also has Rs 2 crore in form of bank balance.

11. If the book value per share of Company Z is Rs 22 and Price to book value ratio of the peer group is 1.5 then what
would be value of each share of Z ?

12. The sales turnover of AB Company is Rs 150 crore. The peer group sales turnover is Rs 600 crore and the peer group
market capitalization is Rs 1800 crore. Calculate the value of AB company.

13. Dividend paid by XYZ Ltd. last year was Rs. 3 per share and it is expected that there will be no growth in the
dividend for many years to come. The investor needs 15% return to invest in the equity share of XYZ Ltd. What is the
value of the equity share of XYZ today? 1.

14. Dividend paid by XYZ Ltd. last year was Rs. 3 per share and it is expected that it will perpetually grow by 10% per
annum. The investor needs 15% return to invest in the equity share of XYZ Ltd. What is the value of the equity share
of XYZ today?

Dividend / r-g

15. Alpha Company’s ROE is 18 percent and its r is 15 percent. Alpha’s dividend payout ratio is 0.4 and its
ploughback ratio 0.6. So, from a fundamental point of view, What is Alpha’s P/E multiple
16. Magna Corporation’s ROE is 20 percent and its r is 16 percent. Magna’s dividend payout ratio is 0.4 and its g is 12
percent. From a fundamental point of view, calculate Magna’s P / BV

17. R is a listed company which is being valued for an acquisition by a PE firm. Suppose that there are two
comparable companies, P and Q, with the following financial numbers. What would be the value to be offered by PE
firm to acquire R.

P ( Rs in Cr) Q ( Rs in Cr) R ( Rs in Cr)

Sales 3000 5000 4000
EBITDA 500 800 600
Book value of assets 2000 3000 1000
Enterprise value 4000 5600

18. The following financial information is available for company D, an unlisted pharmaceutical company, which is
being valued. What value would you attach to Company D ?

EBITDA : Rs. 400 million

Book value of assets : Rs. 1,000 million

Sales : Rs. 2,500 million

Based on an evaluation of a number of listed pharmaceutical companies, A, B, and C have been found to be
comparable to company D.

The financial information for these companies is given below:

A (Rs in Mn) B(Rs in Mn) C (Rs in

Mn)
Sales 1600 2000 3200
EBITDA 280 360 480
Book value of assets 800 1000 1400
Enterprise value (EV) 2000 3500 4200
19. Following financial information is available of companies engaged in manufacturing chemicals. X Ltd is the target
firm for acquisition. How does the stock price of X Ltd look relative to that of its peers ?

X Ltd (in $) Y Ltd (in $) Z Ltd (in $)

Price / share 150 70 90
Shares Outstanding 2500 10500 3000
Cash 4500 22500 8000
Debt 3750 16000 6250
EBITDA 7250 14250 10000

20. Acquiring Company is considering the acquisition of Target Company in a stock- for- stock transaction in which
target Company would receive Rs 90 for each share of its common stock. The Acquiring company does not expect
any change in its price/ earnings ratio multiple after the merger and chooses to value the target company
conservatively by assuming no earnings growth due to synergy.

The following additional information is available.

Particulars Acquiring Target

Earnings Rs 2,50,000 Rs 72,500
Number of shares 1,10,000 20,000
Market Price per Share Rs 50 Rs 60
Calculate :

The purchase price premium

The exchange ratio

The number of new shares issued by the acquiring company.

Post-merger EPS of the combined firms

Pre-merger EPS of the Acquiring company

Pre-merger P/E ratio of Acquiring company

(vii) Post-merger Value of the company = eps * P/E * No. of shares

(viii) Post-merger equity ownership distribution.

21. Following are the particulars of two companies A Ltd and Z Ltd. Z Ltd is acquired by A Ltd. Shareholders of Z Ltd
will be discharged shares of A Ltd.

Particulars A Ltd Z Ltd

EAT 2,00,00 60,000
0
No of Equity Shares outstanding 8,000 4,000
EPS 25 15
P/E ratio 8 5
Market Price 150 75
Calculate:

Exchange ratio based on EPS and MPS

No of shares issued to Z ltd

Value of the Firm post-merger

22. R Ltd is intending to acquire S Ltd. (by merger) and the following information are available in respect of both the
companies.

Particulars R Ltd. S Ltd.

Total current Earnings Rs 2,50,000 Rs 90,000
No. of Outstanding Shares 50,000 30,000
Market price per share Rs 21 Rs 14
What is the present EPS of both the companies?
If the proposed merger takes place what would be the new earnings per share for R Ltd. (assuming the
merger takes place by exchange of equity shares and the exchange ratio is based on the current market
price)?

What should be the exchange ratio if S Ltd. wants to ensure the same earnings to members as before the
merger took place?