Asked Nov 3, 2019

Using the P/E multiples approach to valuation, What is the estimated price of a stock if the firm’s P/E ratio is 18.2 and it’s earnings are $452,000? Assume that there are 100,000 shares of stock outstanding.  


Expert Answer

Step 1

Calculation of estimated price of stock:


Expected price of stock is $82.26

Step 2

Calculation of EPS:


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Earnings EPS= Number of shares outstanding $452,000 100,000 = $4.52


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