A company in the same industry as Company XYZ has a price-to-earnings (P/E) ratio of 15. If Company XYZ's earnings per share (EPS) is $3, what is the estimated value of Company XYZ's stock based on the P/E multiple? a b C $20 $30 $45 $50

A company in the same industry as Company XYZ has a price-to-earnings (P/E) ratio of 15. If Company XYZ's earnings per share (EPS) is $3, what is the estimated value of Company XYZ's stock based on the P/E multiple? a b C $20 $30 $45 $50

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter14: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 1DTM

See similar textbooks

Related questions

Q: The amount of interest on $X for two years is $330. The amount of discount on $X for one year is…

A: Effective interest rate is the interest rate after considering the impact of compounding on the…

Q: u are the Town Engineer for Pleasantville USA. Pleasantville needs to repave its Main Street. A…

A: The projects are analysed based on the time value of the money including initial cost and annual…

Q: chester owns a tanning salon that is expected to produce annual cash flows forever. the tanning…

A: A perpetuity is a cash flow that goes on forever. In other words, the cash flows occur for an…

Q: If you sell this bond in exactly one year, having paid $400, and received exactly one coupon…

A: To calculate your total return when selling a bond in one year, you need to consider both the coupon…

Q: bt Corporation's Class Semi bonds have a 14-year maturity and a 10.50% coupon paid semiannually…

A: A bond can be priced at par, premium or at a discount. A bond is priced at a premium when the coupon…

Q: K If the risk-free rate of interest (rf) is 3.5%, then you should be indifferent between receiving…

A: Future Value is that amount which includes the interest earned on the investment. If we will…

Q: 20) To solve for the present value of $100,000 to be received 10 years from now with an annual…

A: Compounding is how much time the interest is paid during the given and the effective rate increases…

Q: How much does Herbert need to save each year for 10 years as a regular savings payment if he wants…

A: The FV of an investment refers to the combined value of the cash flows of the investment assuming…

Q: Jack Fraizer has the opportunity to invest in a project. The cost of the project is R8 million, with…

A: Pay-Back(PB) Period shows time period required to fully recover initial outlay through successive…

Q: Derek borrows $40,041.00 to buy a car. He will make monthly payments for 6 years. The car loan has…

A: Time value of money (TVM) means that the amount of money received in the present period will have…

Q: Estimate the difference between short-term interest rates in Switzerland and the U.S. in May 2016.…

A: According to interest rate parity the exchange rate should change based on the change in interest…

Q: Consider a $5,000,000, 10% rate, 30-year mortgage with constant annual payments, fully amortizing.…

A: Here,Mortgage Amount is $5,000,000Time to Maturity is 30 yearsInterest Rate is 10%

Q: IBQ has been paying a dividend of $1.25 per quarter for several years. Its management plans to…

A: The stock price is the cash that would be remitted by the buyer to the seller of the stock…

Q: A 30-year maturity bond has a 6.7% coupon rate, paid annually. It sells today for $881.17. A 20-year…

A: A bond is a kind of debt security issued by the government and private companies to the public for…

Q: DVANTAGES AND DISADVANTAGES OF NPV?

A: NPV is the most used method of capital budgeting and is based on the time value of money and can be…

Q: The debt component of convertible bonds issued using IFRS is the a. present value of the future cash…

A: When a company issues a convertible bond under International Financial Reporting Standards (IFRS),…

Q: You decide to save $6800 by making semiannual deposits for 5 years into an account which pays 3%…

A: Compound = Semiannually = 2Future Value after 10 years = fv $6800Number of Deposit = n = 5 * 2 =…

Q: on't provide handwritten solution ... Daniel is working in the operations management industry and…

A: Financial planning is very important for achieving the financial objective so there is no problem…

Q: Financial Mathematics Please answer all parts of the question Suppose you will receive $50,000 in…

A: The concept of time value of money will be used and applied here. As per the concept of time value…

Q: Your older sister deposited $15,000 today at 17.5 percent interest for 20 years. You would like to…

A: Future Value = Present Value * (1 + Interest Rate)^time

Q: Richard and Linda Thomson operate a local lawn maintenance service for commercial and residential…

A: Operating cash flow (OCF), also known as cash flow from operations (CFO), is a critical financial…

Q: A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a…

A: SecuritiesExpected RateStandard DeviationStock fund21%28%Bond Funds12%18%Risk free…

Q: Jenny Rene, the CFO of Asor Products, Inc., has just completed an evaluation of a proposed capital…

A: Traditional NPV (Net Present Value) focuses on evaluating the financial feasibility of a project…

Q: Brenda plans to reduce her spending by $90 a month. Calculate the future value of this increase in…

A: The future value of money pertains to the worth of a sum of money at a later point in time,…

Q: Sure Tea Company has issued 6.3% annual coupon bonds that are now selling at a yield to maturity of…

A: Step 1The amount owed and due to be paid to the holder of a financial obligation as of the…

Q: The index model has been estimated for stocks A and B with the following results: RA= 0.12 +0.630RM+…

A: The returns of the stocks are expressed in terms of alpha and beta. We have to use the covariane…

Q: Based on the following data, determine the total liabilities Balance Sheet and Cash Flow Items Rent…

A: Total assets include all cash, property and equipment that have monetary value and can be sold and…

Q: An analyst at a company notes that its cost of debt is far below that of equity. He concludes that…

A: The balance between equity and debt in a company's capital structure is a fundamental aspect of…

Q: SMART is the criterion that objectives in a corporation should adhere to

A: The SMART criteria is an acronym that stands for Specific, Measurable, Achievable, Relevant, and…

Q: Lloyd is a divorce attorney who practices law in Florida. He wants to join the American Divorce…

A: Here, The annual membership due (in the beginning of the year) is $600 ( it is a case of annuity…

Q: The Return on Equity (ROE) of Company Q is 8.8%. If the industry average of ROE is 3.7%, is company…

A: Given information,Industrial average: ROE of company Q: To derive,whether company Q has higher or…

Q: Given the following cash flows for two mutually exclusive projects, and a required rate of return of…

A: Npv is also known as Net present value. It is a capital budgeting technquie. Which Help in decision…

Q: What principal deposited 5 years ago will grow to $33,441.22 in 3 years and 11 month from now if…

A: In compounding there is interest on interest including the original amount of deposited done so…

Q: A 30-year fully amortizing mortgage loan was made 10 years ago for $82,000 at 6 percent interest.…

A: Loan amortization refers to the systematic periodic payment of loan and interest amount over a…

Q: Even though most corporate bonds in the United States make coupon payments semiannually, bonds…

A: Current price of the bond is the present value of all the expected future cash flows from holding…

Q: Which economic report has where the 1-year CDS spread for Spain is trading at today? Country Summary…

A: The problem case wants to identify the report that contains information about the financial markets…

Q: Given the information below for Seger Corporation, compute the expected share price at the end of…

A: The full name of the P/E ratio is the price earning ratio it's an important financial tool because…

Q: 4000 3500 3000 2500 2000 1500 1000 500 0 ARITHMETICI $0.00 1 • Solve for the Present Value. • N =…

A: The PV of an investment refers to the combined value of the cash flows assuming that they are…

Q: One year ago you bought the common stock of Mizuho at ¥1050 in Tokyo Stock Exchange. The price is…

A: Purchase price of common stock ¥1,050.00Exchange rate at the of purchase 100 Yen per Dollar Dividend…

Q: If you invest €1,000 in a savings account that pays 4 per cent every year, how long would it take…

A: Present Value = pv = €1000Interest rate = r = 4%Future Value = fv = 1000 * 3 = €3000

Q: What is the effective annualized rate compounded continuously that is equivalent to 16.000% per…

A: Effective annual rate is the nominal interest rate being compounded for a given period of time, i.e.…

Q: Suppose you would like to retire in 15 years. To save for retirement, you deposit an amount A into…

A: Cash flows occurring at the start of each period is called an annuity due. Here the amount of A is…

Q: Suppose we observe the following rates: 1R₁ = 6.2%, 1R2 = 7.1%, and E(21) = 6.2%. If the liquidity…

A: Given information,1r1: 1r2: e(2r1): To calculate,Liquidity premium

Q: 1) Suppose you work for Meijer, a large grocer headquartered in Michigan. 20 years ago, Meijer…

A: Incremental Cash Flow: Incremental cash flow is defined as the increase in the cash flow over the…

Q: LY ANSWER QUESTION 2) Consider the three stocks in the following table. Pt represents price at time…

A: The rate of return refers to the minimum return earned by the investor while investing in the stocks…

Q: Moses Manufacturing is attempting to select the best of three mutually exclusive projects, X, Y,…

A: Risk-adjusted NPV is the summation of the cash streams that are discounted using the risk-adjusted…

Q: Content Area Effect of Financing on Earnings Per Share BSF Co., which produces and sells skiing…

A: The Earnings per share refers to the profits available to be distributed amongst the common…

Q: What is the future value in five years of $1,000 invested in an account with an APR of 10 percent,…

A: The FV of an investment refers to the combined worth of the cash flows of the investment at a future…

Q: You can include Fixed Assets in the Net Working Capital formula. T/F

A: Assets are resources owned by a company that have future economic value.Fixed assets are long-term…

Q: The following table displays hypothetical stock quotations. Use the information in the table to…

A: For those who depend on their stock investment for a portion of their current income, it is…

Question

A company in the same industry as Company XYZ has a price-to-earnings (P/E) ratio of 15.
If Company XYZ's earnings per share (EPS) is $3, what is the estimated value of Company
XYZ's stock based on the P/E multiple?
a
b
C
d
$20
$30
$45
$50

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction to relative valuation

VIEW

Step 2: Calculation of XYZ's stock value

VIEW

Solution

VIEW

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

The Cost of Equity and Flotation Costs Messman Manufacturing will issue common stock to the public for $30. The expected dividend and the growth in dividends are $3.00 per share and 5%, respectively. If the flotation cost is 10% of the issue’s gross proceeds, what is the cost of external equity, re?
Reno Revolvere has an EPS of $1.50, a cash flow per share of $3.00, and a price/cash flow ratio of 8.0. What is its P/E ratio?
Marj Corporation is currently selling for P22 per share. If it is selling at a Price-earnings ratio of 12, calculate Marj Corporation’s recent earnings per share. a. P1.83 b. P0.55 c. P2.20 d. P0.45
Marj Corporation is currently selling for P22 per share. If it is selling at a Price-earnings ratio of 12, calculate Marj Corporation's recent earnings per share. * P1.83 P2.20 PO.55 P0.45
If a company's P/E ratio is 24 and the company's EPS is $1.50 what is the company's share price? Multiple Choice $36.00 $25.50 $16.00 $6.25
Compute for the price-earnings ratio if the earnings per share are Php 5.50: Market Value per share P.E Ratio 1 27.500 2 30.250 3 22.000 4 17.875 5 28.875
A company reports earnings per share on common stock of $2.00 when the market price of per share of common stock is $50.000. What is the company’s price-earnings ratio? Group of answer choices 25.0 5.0 $2.00 2.5
A company has earnings per share of $9.00. Its dividend per share is $1.35, its market price per share is $107.10, and its book value per share is $83. Its price-earnings ratio equals: Multiple Choice 11.90. 9.22. 6.67.
A company has an EPS of 2.00 a book value per share of 20, and a market/book ratio of 1.2x. What as its P/E ratio?
Red Company's book value per share is P25, the market to book value ratio is 1.5. If the earnings per share is P12.50, what is the P/E ratio? (Whole number)
PQR Co. has earnings of $2.65 per share. The benchmark PE for company is 22. What stock price (to two decimals) would you consider appropriate?
If a company has a current stock price of $45, an EPS of $3/share; EPS growth rate of 10% and the investors rate of return is 15%, calculate the cash cow price.0 a. $180 b. $190 c. $22 Od. $210 e. $20IGENEXT