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Good Evening,
Bop kit business valuation
1. If the p.e ratio of danoca is lower than average sector p.e ratio then the market does not view the growth prospects of danoca very favourably.
2.,if the p.e ratio of danoca is higher than the average sector ratiovthenvthe acquisition by pgobis could result in improved financial performance of danoca.
I calculated the mv per share which was 4 dollar and danoca p.e ratio is 8.25. The industry p.e ratio is 4/0.4 =10. The figures given in the question are below
Eps=40c earnings yield =10% ordinary share priceSo I agree with statement 1 but I’m not sure about statement 2
Either BPP has mistyped in the answer, or you have misread it.
I am looking at the examiners own answer and it does not say that the PE ratio of Danoca is higher. It does say that the PE ratio of Danoca is 8.25, but that the PE ratio valuation using the average PE for the sector (of 10) is higher at $20M than the current valuation of $16.5M, which therefore course result in improved financial performance if Phobos manages it better.
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