1. Compute the average P/E ratio of the industry. Include the ratio of all companies in the computation of industry average. 2. Assuming that Northrop's earnings is P11.50 per share, compute for the company's relative value based on the industry average P/E ratio. * 3. Assume that Grumman is the subject company and all others are comparable companies. How much must be its relative value based on the median P/BV ratio of comparable companies if its book value per share is P62? The ratio of the subject company must not be included in computing the median ratio of comparable companies. *
1. Compute the average P/E ratio of the industry. Include the ratio of all companies in the computation of industry average.
2. Assuming that Northrop's earnings is P11.50 per share, compute for the company's relative value based on the industry average P/E ratio. *
3. Assume that Grumman is the subject company and all others are comparable companies. How much must be its relative value based on the median P/BV ratio of comparable companies if its book value per share is P62? The ratio of the subject company must not be included in computing the median ratio of comparable companies. *
4. Using the the industry averages of the three ratios, would you buy Loral at its current price? (Explanation should be on the handwritten solution) *
Yes
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