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Valuation
Measuring and Managing the Value of Companies
5th Edition
Chapter 12 Solutions
Moving from Enterprise Value to Value per share
Version 1.0
April 1, 2010
Chapter 12
Questions 1 & 2 Question 1 Question 2
Valuation Sale No sale Nonconsolidated subsidiary Contingent claim
Gain on sale 70 A3er-tax expected claim 7
Key data Atier-tax cash to MarineCo
Chapter 12
Questions 3 & 4
Manufacturing subsidiary
Operating profit Net income Key statistics
Sales of machinery 1,500 Revenues of financial products 400 Return on invested capital 9.5%
Cost of goods sold (1,000) Interest expense of financial products (350) Return on invested capital plus ROE 12.5%
Question 4
MarineCo's financing subsidiary should be evaluated as a stand-alone entity. Since the subsidiary is owned by a company with other assets (the
Customer financing subsidiary
Chapter 12
Question 5
Weighted Weighted
Enterprise Debt Equity enterprise equity
Scenario value value value Probability value value
200 25.0
New management plan
Weighted Weighted
Enterprise Debt Equity enterprise equity
Scenario value value value Probability value value
DiGerence in equity value –
The entire value increase accrues to the debt holder, a common problem with distressed companies.
Chapter 12
Question 6
Value of Exercise Exhibit data
outstanding value
options approach Option data Outstanding
Option pricing
Option inputs
Market inputs
Option price calculations
Number of shares (million)
$ million
Income statement Balance sheet
EXHIBIT 12.8 MarineCo: Income Statement and Balance Sheet
