1. The shares of a firm trade on the stock market at a total of $1.

2 billion and its debt trades at

$600 million. What is the value of the firm (its enterprise value)?
2. An analyst estimates that the enterprise value of a firm is $2.7 billion. The firm has $900 million
of debt outstanding. If there are 900 million shares outstanding. What is the analyst’s estimated
value per share?
3. General Motors ended its 2007 year with shareholders’ equity of negative $37,094 million at
December 31 (yes, negative equity!). Six months later, at June 30, 2008, it reported negative
$56,990 million in equity after paying a dividend of $283 million to shareholders. There were no
other transactions with shareholders. What was comprehensive income for the six months?
4. At the end of its 2007 fiscal year, Cisco Systems, Inc., the producer of routers and other
hardware and software for the telecommunications industry, reported shareholders’ equity of
$31,931 million. At the end of the first nine months of fiscal 2008, the firm reported $32,304
million in equity along with $6,526 million of comprehensive income for the period. What was
the net transactions with shareholders in the first nine months of 2008?
5. General Motors ended its 2007 year with shareholders’ equity of $37,094 million at December
31 (yes, negative equity!). Six months later, at June 30, 2008, it reported $56,990 million in
equity after paying a dividend of $283 million to shareholders. There were no other transactions
with shareholders. The firm reported $148,883 million of total assets at the end of 2007 and
$136,046 at June 30, 2008. What were total liabilities at these two dates?
6. The shares of Nike, Inc., traded at $50 per share at the beginning of fiscal year 2008 and closed
at $70 per share at the end of the year. Nike paid a dividend of 1 USD per share during the year.
What was the return to holding Nike’s shares during 2008?
7. General Motors ended its 2007 year with shareholders’ equity of negative $40,094 million at
December 31 (yes, negative equity!). The net income was negative 15,500 mln USD. The
comprehensive income was negative 20,596 mln USD. Calculate the other comprehensive
income?
8. At the end of its 2007 fiscal year, Cisco Systems, Inc., the producer of routers and other
hardware and software for the telecommunications industry, reported shareholders’ equity of
$32,000 million. At the end of the first nine months of fiscal 2008, the firm reported $35,000
million in equity along with $7,000 million of comprehensive income for the period. Cisco paid
no dividends and share issues amounted to $3,000 million. What was the amount of shares
repurchased during the first nine months of 2008?
9. If a firm has a P/E ratio of 40 and a profit margin on sales of 6 percent, what is its price-to-sales
(P/S) ratio likely to be?
10. If a firm has a P/E ratio of 30 and a profit margin on sales of 6 percent, what is its price-to-sales
(P/S) ratio likely to be?
11. A firm trading with a total equity market value of $100 million reported earnings of $5 million
and book value of $50 million. This firm is used as a comparable to price an IPO firm with
earnings per share of $2.50 and book value per share of $30 per share. Neither firm pays
dividends. What per-share IPO price does the comparable firm imply?
12. A firm trading with a total equity market value of $100 million reported earnings of $5 million
and book value of $50 million. This firm is used as a comparable to price an IPO firm with
earnings per share of $3 and book value per share of $50 per share. Neither firm pays dividends.
What per-share IPO price does the comparable firm imply?
13. A firm trading with a total equity market value of $100 million reported earnings of $5 million
and book value of $50 million. This firm is used as a comparable to price an IPO firm with
earnings per share of $4 and book value per share of $50 per share. Neither firm pays dividends.
What per-share IPO price does the comparable firm imply?
14. A firm reported $250 million in total assets and $140 in debt. It had no interest-bearing
securities among its assets. In the income statement it reported $560 million in sales. The firm’s
80 million shares traded at $7 each. Calculate price to book multiple.
15. A firm reported $300 million in total assets and $200 in debt. It had no interest-bearing
securities among its assets. In the income statement it reported $560 million in sales. The firm’s
80 million shares traded at $7 each. Calculate unlevered price to sale multiple..
16. A firm issues a zero-coupon bond with a face value of $1,000, maturing in five years. Bonds with
similar risk are currently yielding 5 percent per year. What is the value of the bond?
17. Buying a stock. A firm is expected to pay an annual dividend of $3 per share forever. Investors
require a return of 12 percent per year to compensate for the risk of not receiving the expected
dividends. The firm’s shares trade for $19 each. What is the value added by buying a share at
$19?
18. Buying a stock. A firm is expected to pay an annual dividend of $1 per share forever. Investors
require a return of 12 percent per year to compensate for the risk of not receiving the expected
dividends. The firm’s shares trade for $19 each. What is the value added by buying a share at
$19?
19. A firm with 100 million shares outstanding repurchased 10 million shares at the market
price of $15 per share. What is the total market value of the equity after the repurchase?
What is the per-share value after the repurchase?
20. If a firm has a P/E ratio of 200 and a profit margin on sales of 6 percent, what is its price-to-sales
(P/S) ratio likely to be?