A Company's performance will have an impact on its Valuation. Based on following information prepare a sensitive table on how changes in sales affects the Company's Enterprise Valuation : Amount (INR Crore) Percentage Sa

CS Professional · Corporate Restructuring, Insolvency, Liquidation & Winding-up · PYQS · December 2023
A Company's performance will have an impact on its Valuation. Based on following information prepare a sensitive table on how changes in sales affects the Company's Enterprise Valuation : Amount (INR Crore) Percentage Sales 1000 Cost of Sales 700 70% on Sales Gross Profit 300 Fixed Cost 150 (Constant upto ₹ 2000 Crore of Sales) Variable Cost 100 10% on Sales Earnings before Tax (EBT) 50 Tax 12.50 25% of EBT Earning after Tax 37.50 EPS (in ₹) 25 P/E ratio of the industry 20 Market Price per Share ? Enterprise Value ? The Company has 1.5 Crore Equity Shares of ₹ 10 each : (i) Find out the Market Value per Share and Enterprise Value. Also give your opinion on the results.

Answer & Explanation:

Answer 2A(iii)(i) Calculation for Present Scenario: EPS (in ₹) = 25 P/E ratio of the industry = 20 Market Price per Share = EPS * P/E Ratio = 25 * 20 = ₹500 No. of Shares = 1.5 Crore = 1,50,00,000 Enterprise Value = Market Price per Share * No. of Shares = 500 * 1,50,00,000 = ₹7,50,00,00,000 Opinion on the results: The current market price per share is ₹500 and the enterprise value is ₹7,500 crore. This provides a baseline for evaluating the impact of changes in sales.

Topics: Valuation

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