ZuoTi.Pro
Question

Vick Resources has a P/E ratio of 15, a P/S ratio of 5, and a P/B...

Vick Resources has a P/E ratio of 15, a P/S ratio of 5, and a P/B ratio of 2.5. Vick’s earnings per share are 2.15, its sales per share are 8.00, and its book value per share is $16. An analyst will estimate the value per share with each multiplier, and then use a weighted average of these estimates where the P/E estimator is weighted 0.5, the P/S estimator is weighted 0.3, and the P/B estimator is weighted 0.2. What is the final estimated price per share for Vick?

A.

$40.75
B.

$42.25
C.

$37.42
D.

$36.12
business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

The final estimated price per share for Vick is computed as shown below:

= PE ratio x earnings per share x weight of PE estimator + P/S ratio x sales per share x weight of P/S estimator + P/B ratio x book value per share x weight of P/B estimator

= 15 x $ 2.15 x 0.5 + 5 x $ 8 x 0.3 + 2.5 x $ 16 x 0.2

= $ 36.12 Approximately

So the correct answer is option D i.e. $ 36.12

Feel free to ask in case of any query relating to this question

0 0
Add a comment
Know the answer?
Add Answer to:
Vick Resources has a P/E ratio of 15, a P/S ratio of 5, and a P/B...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Question #4: Stock Valuation and P/E Ratio [16 Points) The research analyst at Needham & Company...

    Question #4: Stock Valuation and P/E Ratio [16 Points) The research analyst at Needham & Company believes that Tootsie Roll Industries has a return on equity (ROE) of 11% with a beta (B) of 0.60. Tootsie Roll Industries plans to maintain indefinitely its plowback ratio of 0.58. The firm's earnings this year (E.) were equal to $1.20 per share. The research analyst estimates that the expected return this year for the market E(r.) will equal 12.5% and T-bills will offer...

  • The price earnings (P/E) ratio is 5. The earnings per share over the last twelve months...

    The price earnings (P/E) ratio is 5. The earnings per share over the last twelve months is $5.20. Common stock has a par value of $1 per share and was issued at $9 per share. What is the current market price of the stock? Select one: a. $46.80 b. $45.00 c. $5.00 d. $26.00

  • PEGCOR has a​ P/E ratio of 14.2. Earnings per share are $2.73​,and the expected EPS 5...

    PEGCOR has a​ P/E ratio of 14.2. Earnings per share are $2.73​,and the expected EPS 5 years from today are $4.19.Calculate the PEG ratio.​ (Refer to Chapter 4 if​necessary.) The PEG ratio is____

  • 11. The following about the price earnings ratio (P/E) is/are correct except: (2 marks) a. It...

    11. The following about the price earnings ratio (P/E) is/are correct except: (2 marks) a. It is computed by multiplying the market price of the share by its earnings per share. b. PE ratio is used to discuss the investment possibility of a given enterprise C. The greater the P/E ratio, the better the perception of investors regarding the future growth of the firm. d. If a company's P/E ratio drops steadily this indicates that investors are confident of the...

  • (Related to Checkpoint 10.2) (Relative valuation of common stock) Using the P/E ratio approach to valuation,...

    (Related to Checkpoint 10.2) (Relative valuation of common stock) Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions: • the investor's required rate of return is 13 percent, • the expected level of earnings at the end of this year (E1) is $4, • the firm follows a policy of retaining 30 percent of its earnings, • the return on equity (ROE) is 15 percent, and • similar shares of...

  • Question 9: (10 points). (Relative valuation of common stock) Using the P/E ratio approach to valuation,...

    Question 9: (10 points). (Relative valuation of common stock) Using the P/E ratio approach to valuation, calculate the value of a share of stock under the following conditions .the investor's required rate of return is 13 percent, the expected level of earnings at the end of this year (E1) is $8, the firm follows a policy of retaining 40 percent of its earnings, the return on equity (ROE) is 15 percent, and similar shares of stock sell at multiples of...

  • 1. A firm s _____ added to its _____ equals 1.0.             a.  earnings per share, PE ratio...

    1. A firm s _____ added to its _____ equals 1.0.             a.  earnings per share, PE ratio             b.  ROA, ROE             c.  growth rate, net income             d.  payout ratio, plowback ratio 2. Amuzon Corp. is currently selling for $30/share and recently reported annual earnings of $2 million, 1 million shares outstanding, and forecasted earnings/share of $2.50 next year.  Amuzon Corp.'s trailing P/E ratio is: a.  15             b.  12             c.  30             d.  6.67% 3. If the PE of a broad market index is below the historical average PE, an investor might...

  • Problem 4-5 Price/Earnings Ratio A company has an EPS of $4.05, a book value per share...

    Problem 4-5 Price/Earnings Ratio A company has an EPS of $4.05, a book value per share of $43.74, and a market/book ratio of 3.0x. What is its P/E ratio? The stock price should be rounded to the nearest cent. Round your answer to two decimal places.

  • (Related to Checkpoint 10.2) (Relative valuation of common stock) Using the P/E ratio approach to valuation, calcula...

    (Related to Checkpoint 10.2) (Relative valuation of common stock) Using the P/E ratio approach to valuation, calculate the value of a share of stock ur following conditions: • the investor's required rate of return is 12 percent, . the expected level of earnings at the end of this year (E) is $8, • the firm follows a policy of retaining 40 percent of its earnings • the return on equity (ROE) is 12 percent, and Similar shares of stock sell...

  • 1. Stock prices and stand-alone risk The S&P 500 Index is one of the most commonly...

    1. Stock prices and stand-alone risk The S&P 500 Index is one of the most commonly used benchmark indices for the U.S. equity markets. Consisting of 500 companies, it is a market value-weighted index. This means that each company's performance is reflected in the index, weighted by the ratio of the company's value to the total value of all the companies. Based on your understanding of P/E ratios, in which of the following situations would the average trailing P/E ratio...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT