FifeSiete. has debt of $230 million and generated a net income of $121 million in the last fiscal year. In attempting to determine the total value of the firm, an investor identified a similar firm in Neuncon, Inc., an all-equity firm. This firm had 150 million shares outstanding, a share price of $14.25, and net income of $182 million. What is the total value of FifeSiete? (Round to the nearest million dollars.)

Question

Quizplus · Accepted Answer

The total value of FifeSiete can be estimated using the P/E ratio of the similar firm, Neuncon, Inc. Neuncon's P/E ratio is calculated as (150 million shares * $14.25) / $182 million = 11.75. Applying this P/E ratio to FifeSiete's net income: 11.75 * $121 million = $1,421 million. Adding FifeSiete's debt of $230 million gives a total value of $1,651 million.

FifeSiete Has Debt of $230 Million and Generated a Net