Please show all formulas and calculations.
1.Ocean Technologies is considering going public and is trying to determine a price for their IPO. Their most recent earnings per share = $7.50 Mediterranean Corp is a similar firm, has a stock price per share of $120 and earnings per share of $5.50. What price do you recommend Ocean use for their IPO?
2.Aberdeen Corp is considering a new 4-year project. The initial fixed asset investment is $5.25 million. The fixed asset will be depreciated straight line to $250,000 over 4 years, after which, it will have a market value of $425,000. The project requires an initial investment of $700,000 in NWC, which will be recovered at the end of the project. It will generate $3,400,000 in annual sales, with annual costs of $1,400,000. The tax rate is 40% and the required return is 8%.
A. What is the aftertax salvage value of the fixed asset?
B. What is the operating cash flow of the project in years 1-4?
C. What is the NPV of this project? Should the firm proceed?