BCO212 Business Finance Final Exam

BCO212 Business Finance Final Exam
BCO212 Business Finance 1 Final Exam Makeup
· individual
· upload word document or pdf with solutions
Formalities:
· Wordcount: 900 words maximum, 600-900 words normal
· Cover, Table of Contents, References and Appendix are excluded of the total wordcount.
· Font: Arial 12,5 pts.
· Text alignment: Justified.
· The in-text References and the Bibliography have to be in Harvard’s citation style.
Submission:
Weight:
It assesses the following learning outcomes:
· To be able to conduct equity valuation
· Understand the idea of valuation using comparables
Exercise 1 (20 points):
XYZ tech is based in European Union. Share price of XYZ is traded at 62 euro per share. Company is paying dividends once a year. Expected dividend next year is about 1.25 euro per share. Return on equity is equal to 0.12.
Question 1.1:
Using Gordon model find implied growth rate of the company XYZ (10 points)
Question 1.2:
You are worrying that company might be overvalued. Forward P/E ratio in tech sector is about 20. Analysts (whom you trust) expect that earnings per share will be 2 euro per share. Use relative (multiples) valuation method to estimate “fair” share price. Compare your estimate to the actual share price and make a conclusion whether company is overvalued or no? (10 points)
Exercise 2 (30 points):
Procter