The PE valuation range is estimated to be 6x to 8x for Roosters Ltd. What would be the implied share price range for Roosters Ltd if next year its expected net income is $50 million, it has a net debt of $100 million and 100 million fully diluted shares?

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BlackTom AI · Accepted Answer

The question asks for the implied share price range using a PE valuation multiple.
First, interpret the PE range: 6x to 8x means the equity value equals Net Income × PE multiple. With next year’s expected net income of $50 million:
- At 6x: Equity value = 50 million × 6 = 300 million.
- At 8x: Equity value = 50 million × 8 = 400 million.
Next, adjust for net debt to obtain the equity value from the enterprise value perspective provided by the PE multiples. The company has net debt of $100 million, so:
- Lower end equity value after debt adjustment = 300 million − 100 million = 200 million.
- Upper end equity value after debt adjustment = 400 million − 100 million = 300 million.
Now, convert equity value to price per share using fully diluted shares outstanding, which are 100 million shares:
- Lower end price per share = 200 million ÷ 100 million = $2.00.
- Upper end price per share = 300 million ÷ 100 million = $3.00.
Putting these together, the implied share price range is $2 to $3 per share.
The answer option shown as "$3 to $4" would imply higher earnings multiples or a smaller net debt adjustment than what the given figures support. Specifically, using the provided net income, debt, and share count, the math yields a $2–$3 range, not $3–$4.
If you intended a different convention (for example, using enterprise value multiples directly without subtracting net debt, or a different share count), the result would change accordingly, but with the numbers given in the problem, the computed range is $2 to $3. 
Note: The absence of answer options in the prompt means we’re validating the calculation against the expected method rather than selecting from listed choices.

25743 Advanced Corporate Valuation - Autumn 2025 Online Quiz Autumn 2025

The PE valuation range is estimated to be 6x to 8x for Roosters Ltd. What would be the implied share price range for Roosters Ltd if next year its expected net income is $50 million, it has a net debt of $100 million and 100 million fully diluted shares?

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