Question

Provide a narrative that compares market capitalization, book value, future earnings methods, and other methods mentioned)...

Provide a narrative that compares market capitalization, book value, future earnings methods, and other methods mentioned) with each other.​

Homework Answers

Answer #1

Market Capitalization: The market capitalization calculation is most important and useful stock valuation formula for investment analysis.

Market Capitalization (market cap) it is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to using sales or total asset figures


For instance, a company has 25 million outstanding shares and the current market price of each share is Rs100. Market capitalization of this company will be 250,00,000 x 100= Rs 250 crore.

There are of three types of Stocks in companies.

  1. Large Cap Stock : The stocks with a market cap of Rs 10,000 crore or more are large cap stocks.
  2. Mid Cap Stock: Company stocks with a market cap between Rs 2 crore and 10 crore are mid cap stocks and
  3. Small Cap Stock: those less than Rs 2 crore market cap are small cap stocks.

Book Value: Companys book value or net worth is the share holders equity in the balance sheet it is also difference betweeen total assets and liabiltites, i.e. surplus of the companys total goods and rights over its total debts with third party

Book value refers to the total amount a company would be worth if it liquidated its assets and paid back all its liabilities. Book value can also represent the value of a particular on the company's assets balance sheet after taking accumulated depreciation into account.

Book value is important such that shareholders will receive that much amount per share if a company is liquidated as on date.

Book value is calculated by taking a company's physical assets (including land, buildings, computers, etc.) and subtracting out intangible assets (such as patents) and liabilities -- including stocks, debts and account payables. The value left after this calculation represents what the company is intrinsically worth.

Book value = total assets - intangible assets - liabilities

Discounted future earnings are a method of valuation used to estimate a firm's worth. The discounted future earnings method uses forecasts for the earnings of a firm and the firm's estimated terminal value at a future date, and discounts these back to the present using an appropriate discount rate. The sum of the discounted future earnings and discounted terminal value equals the estimated value of the firm.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Submit a written paper which is 3-4 pages in length, exclusive of the reference page. the...
Submit a written paper which is 3-4 pages in length, exclusive of the reference page. the Abstract is not required or needed. Papers should be double spaced in Times New Roman font which is no greater than 12 points in size. The paper should cite at least one source independent of the textbook. In this paper, please discuss the major methods of company valuation that we have studied. In doing so, explain each method and compare their advantages and disadvantages...
26) Calculate the enterprise value of a firm with a market capitalization (market value of equity)...
26) Calculate the enterprise value of a firm with a market capitalization (market value of equity) of $80 Billion, market value of debt of $29 billion, and $4 billion in cash and equivalents. [ Note: Enter your answer in Billions; for example, if you calculate the enterprise value to be $100 Billion, then enter just 100 in the answer box.] 27) Calculate the NPV of an investment project that has an upfront cost of $1,000,000, but produces ongoing benefits of...
1. As of today, McCormick's market capitalization (E) is $14,237,510,000. Market value of equity (E), also...
1. As of today, McCormick's market capitalization (E) is $14,237,510,000. Market value of equity (E), also known as market cap, is calculated using the following equation: market cap = share price x shares outstanding. 2. McCormick's book value of debt is $3,237,150,000. Book value of debt (D) is calculated as follows: book value of debt = last two-year average of current portion of long-term debt + last two-year average of long-term debt & capital lease obligation. 3. Cost of Equity...
Please explain the concepts of book value, market value and liquidation value of a company. When...
Please explain the concepts of book value, market value and liquidation value of a company. When and why they might be different than each other?
Calculate the Future Growth Value of below company             Total Market Value of Debt                =   &nbsp
Calculate the Future Growth Value of below company             Total Market Value of Debt                =          £260million             Total Market Value of Equity              =          £400million             Book Value of Stockholder’ equity     =          £300million             Total Capital (in Book value)              =          £500million             WACC                                      =          12% p.a.             Current year’s EVA (t=0)                 =          £10million
Why market value is more important than book value? Select one: a. Manager is responsible to...
Why market value is more important than book value? Select one: a. Manager is responsible to increase the market value b. Book value is more important than market value c. All are true d. Market value provide the real value of firm’s asset e. Market value determines firm’s ability to pay their debt
Tomas has the same market value as its book value, they are the same. The company...
Tomas has the same market value as its book value, they are the same. The company has excess cash of $1,100, equity of $13,500 and other assets of $12,400. The company has 2,700 shares of stock outstanding and net income of $10,800. The company then uses its excess cash of $1,100 to do a stock repurchase. After this stock repurchase, how much will the price-to-earnings ratio change? (Show before and after P/E)
A firm has a market value equal to its book value. Currently, the firm has excess...
A firm has a market value equal to its book value. Currently, the firm has excess cash of $700 and other assets of $6,300. Equity is worth $7,000. The firm has 600 shares of stock outstanding and net income of $1,512. What will the new earnings per share be if the firm uses 25 percent of its excess cash to complete a stock repurchase?
Allison's has a market value equal to its book value. Currently, the firm has excess cash...
Allison's has a market value equal to its book value. Currently, the firm has excess cash of $1,100 and other assets of $12,400. Equity is worth $13,500. The firm has 2,700 shares of stock outstanding and net income of $10,800. The firm uses its excess cash to complete a stock repurchase. What will be the change in price-to-earnings ratio?
A firm has a market value equal to its book value. Currently, the firm has excess...
A firm has a market value equal to its book value. Currently, the firm has excess cash of $500 and other assets of $7,000. Equity is worth $7,500. The firm has 750 shares of stock outstanding and net income of $810. What will the new earnings per share be if the firm uses its excess cash to complete a stock repurchase? a) $.63 b) $.71 c) $1.08 d) $1.16 e) $1.79
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT