On what concept is the price-earnings multiple valuation approach based? The board of directors of Smith Brothers is planning an initial public offering. Management is trying toestimate the share price for its IPO. The company plans to issue 400,000 shares. The consensus forecastamong analysts who follow the company is for EPS to be $4.75, up from the company's most recentearnings per share of $4.00. Four comparable firms have been identified for which their EPS and shareprices are shown below:FirmEPSShare Price1$3.30$11.5523.5015.752.259.0042.7013.50

Price earning ratio is computed by dividing the market price of the share by the earnings per share.

Answered: On what concept is the price-earnings…

Business

Accounting

On what concept is the price-earnings multiple valuation approach based?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter14: Corporation Accounting

Section: Chapter Questions

Problem 4TP: On November 7, 2013, Twitter released its initial public offering (IPO) priced at $26 per share....

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On November 7, 2013, Twitter released its initial public offering (IPO) priced at $26 per share. When the day ended, it was priced at $44.90, reportedly making about 1600 people into millionaires in a single day.[20] At the time it was considered a successful IPO. Four years later, Twitter is trading at around $18 per share. Why do you think that occurred? Is Twitter profitable? How can you find out?
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