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A privately held company ABB wants to be listed on a stock exchange. The company expects to earn a net profit of $50 million next year.
A privately held company ABB wants to be listed on a stock exchange. The company expects to earn a net profit of $50 million next year. In order to estimate its equity value, management decided to use price multiple valuation model. Based on P/E ratios of public listed companies from the same industry (listed below), calculate the estimated value of equity for company ABB.
Company 1:
P/E ratio: 7.0
Company 2:
P/E ratio: 12.0
Company 3:
P/E ratio: 8.0
Company 4:
P/E ratio: 9.0
Company 5:
P/E ratio: 6.0
Q: Calculate the estimated value of equity for company ABB by using the price multiple from your answer in (a).
