Question

Financial information for Dell and Apple (as of 12/31/2019)
	Dell	Apple
Market Price	167.77	230.09
Price/sales	1.36	4.01
Trailing P/E	16.3	19.54
Forward P/E	15.01	18.06
Enterprise value	94.99 billion	1.04 trillion
Return on assets (ROA)	3.75%	11.99%
Current ratio	2.02	1.5
Payout ratio	28.86%	25.13%
Diluted EPS	10.38	11.78
Earnings before interest, taxes, and depreciation (EBITDA)	6.15 billion	76.54 billion

Use the information above and the market multiples method of valuation to calculate the intrinsic value of Dell based on the growth prospects of Apple, proxied for by using the trailing P/E ratio.

Group of answer choices

A. $213.85/share

B. $142.18/share

C. $202.74/share

D. $94.99/share

Answer 1

If P/E of Dell becomes 19.54 ( same as Apple)

Diluted EPS of Dell is 10.38

Then share price = 10.38*19.54= 202.7

So correct answer is C) 202.74/share