You work for a firm of stockbrokers and you have been asked to use multiple valuation to estimate the relative value of Dusty Mac Ltd. You have obtained the following financial statements and other information shown below: Balance Sheets as at 30 June ($000) 2020 2021 2020 2021 ASSETS LIABILITIES Current Assets Current Liabilities Cash 19 23 Accounts Payable 41 44 Inventory 41 45 Short-term Borrowings 21 24 Accounts Receivable 30 35 Total current Liabilities 62 68 Total Current Assets 90 103 Non-current Liabilities 157 172 Non-current Assets 431 461 TOTAL LIABILITIES 219 240 Shareholders' Equity 302 324 TOTAL ASSETS 521 564 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 521 564 Income Statements for the year ending 30 June ($000) 2020 2021 Sales 107 117 less Cost of Goods Sold 59 66 Gross Profit 48 66 less Operating Expenses 11 66 EBITDA 37 37 less Depreciation & Amortisation 7 EBIT 32 30 less Interest Expenses 3 5 Profit before tax 29 25 less Tax 9 8 Net Profit 20 18 Dividends Paid (80% of Net Profit) 16 14 Total Shares Outstanding (000) 52 58 2020 2021 2022 (Forecast) Share price 9.77 10.37 10.93 The required rate of return on the firm's shares is 10%. The firm's EPS is expected to grow by 5% in perpetuity. What is the company's trailing P/E ratio? a. 26.96 O b. 33.41 O c. 31.48 O d. 25.40 The required rate of return on the firm's shares is 10%. The firm's EPS is expected to grow by 5% in perpetuity. What is the company's forward P/E ratio? O a. 31.82 O b. 33.54 O c. 33.41 O d. 35.22 The required rate of return on the firm's shares is 7%. The firm's EPS is expected to grow by 5% in perpetuity. What is the company's justified trailing P/E ratio? (Note: You should use the dividend payout policy specified in the first column of the income statement. Do not infer a dividend payout policy based on the rounded values in the second and third columns.) a. 33.4 O b. 31.5 O c. 37.1 O d. 35.4 The required rate of return on the firm's shares is 7%. The firm's EPS is expected to grow by 5% in perpetuity. Based on the company's justified trailing P/E ratio, which of the following statements is true? (Note: You should use the dividend payout policy specified in the first column of the income statement. Do not infer a dividend payout policy based on the rounded values in the second and third columns.) a. The company is overvalued. O b. The company's shares are correctly priced. C. The company is undervalued. O d. Overvaluation or undervaluation cannot be determined because the company's P/E cannot be justified. O Which of the following statements is true? a. Dusty Mac has a P/S ratio of 5.14, and based on that the company is overvalued. O b. Dusty Mac has a P/S ratio of 5.14, and based on that the company is undervalued. O c. Dusty Mac has a P/S ratio of 4.75, and based on that the company is overvalued. O d. Dusty Mac has a P/S ratio of 4.75, and based on that the company is undervalued. You work for a firm of stockbrokers and you have been asked to use multiple valuation to estimate the relative value of Dusty Mac Ltd. You have obtained the following financial statements and other information shown below: Balance Sheets as at 30 June ($000) 2020 2021 2020 2021 ASSETS LIABILITIES Current Assets Current Liabilities Cash 19 23 Accounts Payable 41 44 Inventory 41 45 Short-term Borrowings 21 24 Accounts Receivable 30 35 Total current Liabilities 62 68 Total Current Assets 90 103 Non-current Liabilities 157 172 Non-current Assets 431 461 TOTAL LIABILITIES 219 240 Shareholders' Equity 302 324 TOTAL ASSETS 521 564 TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 521 564 Income Statements for the year ending 30 June ($000) 2020 2021 Sales 107 117 less Cost of Goods Sold 59 66 Gross Profit 48 66 less Operating Expenses 11 66 EBITDA 37 37 less Depreciation & Amortisation 7 EBIT 32 30 less Interest Expenses 3 5 Profit before tax 29 25 less Tax 9 8 Net Profit 20 18 Dividends Paid (80% of Net Profit) 16 14 Total Shares Outstanding (000) 52 58 2020 2021 2022 (Forecast) Share price 9.77 10.37 10.93 The required rate of return on the firm's shares is 10%. The firm's EPS is expected to grow by 5% in perpetuity. What is the company's trailing P/E ratio? a. 26.96 O b. 33.41 O c. 31.48 O d. 25.40 The required rate of return on the firm's shares is 10%. The firm's EPS is expected to grow by 5% in perpetuity. What is the company's forward P/E ratio? O a. 31.82 O b. 33.54 O c. 33.41 O d. 35.22 The required rate of return on the firm's shares is 7%. The firm's EPS is expected to grow by 5% in perpetuity. What is the company's justified trailing P/E ratio? (Note: You should use the dividend payout policy specified in the first column of the income statement. Do not infer a dividend payout policy based on the rounded values in the second and third columns.) a. 33.4 O b. 31.5 O c. 37.1 O d. 35.4 The required rate of return on the firm's shares is 7%. The firm's EPS is expected to grow by 5% in perpetuity. Based on the company's justified trailing P/E ratio, which of the following statements is true? (Note: You should use the dividend payout policy specified in the first column of the income statement. Do not infer a dividend payout policy based on the rounded values in the second and third columns.) a. The company is overvalued. O b. The company's shares are correctly priced. C. The company is undervalued. O d. Overvaluation or undervaluation cannot be determined because the company's P/E cannot be justified. O Which of the following statements is true? a. Dusty Mac has a P/S ratio of 5.14, and based on that the company is overvalued. O b. Dusty Mac has a P/S ratio of 5.14, and based on that the company is undervalued. O c. Dusty Mac has a P/S ratio of 4.75, and based on that the company is overvalued. O d. Dusty Mac has a P/S ratio of 4.75, and based on that the company is undervalued