Estimate the additional equity risk premium

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Reference no: EM133926151

Problem

Jackmaster is an entrainment company with two business lines namely, online entertainment and live concert planning. Jackmater has $2 billion in market value of debt outstanding, $750 million in cash and marketable securities and 150 million shares outstanding. Jackmaster generated 2 billion in revenues but an operating loss of $200 million from the online entertainment business. Most publicly traded companies in the sector reported operating losses with an average EV/Sales ratio of 1.4. Jackmaster generated $3 billion in revenues and EBITDA of $300 million from live concert business. The live concert planning companies that are publicly traded reported an average EV/EBITDA of 10.

I. Estimate Jackmaster's value of equity per share. Get the instant assignment help.

You are an analyst who specializes in semiconductors. Impressive Inc has operations in the U.S. whereas Imitation Inc has operations emerging markets. The current price earnings ratio for Impressive is 25 and the current price earnings ratio for imitation is 15. Both firms are in stable growth with a perpetual growth rate of 3.2%. Both Impressive and Imitation have a payout ratio of 60%. Both firms are also priced correctly via DCF approach.

II. Estimate the additional equity risk premium that the market is charging for Imitation Inc for being an emerging market semiconductor company.

Reference no: EM133926151

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