Energy Biscuits, producing varieties of biscuits, started functioning 10 years ago. There was then no other factory for biscuits in the region. It was one of the reasons that the firm earned huge amount of money. The company had started with 50,000 shares of Rs 100 each. Presently, it likes to value its shares for the purpose of financial planning. This can be done in view of the trends in the biscuit industry as also the past performance of Energy Biscuits. The share price and some other related financial variables of the competing firms in the industry are as follows:
The last year, Energy Biscuits had an EPS of Rs 4.50. The dividend paid totalled Rs 53,500. The return on equity was 25%. The required rate of return was 15%.
1. Find out the value of the shares of Energy Biscuits assuming that the company growth rate has not changed.
2. Does Energy Biscuits have the same price–earnings ratio as the industry average denotes?
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