Abbott Laboratories (ABT) engages in the discovery, development, manufacture, an

Question

Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of a line of health care and pharmaceutical products. Below you will find selected information from Value Line. Use the Value Line estimated 2009 figures as the actual year-end figures for the company. The beta reported was 0.70 and the risk-free rate was 3.28 percent. Assume a market risk premium of 7 percent.

      

     

Using the P/E, P/CF, and P/S ratios, estimate the 2010 share price for Abbott Laboratories. Use the average stock price each year to calculate the price ratios. (Round your answers to 2 decimal places. Omit the "$" sign in your response.)

      

The high and low share price each year were:

Explanation / Answer

Statement of Calculation

For 2010

Based on Given Data

K = r + beta (risk premium)

= 3.28 + 0.70(7)

= 8.18 %

P = EPS / K = 4.15/8.18% = 50.73

Particulars 2005 2006 2007 2008 2009 AVG Avg Price 56 53.15 52.35 55.25 50.45 - EPS 2.50 2.52 2.84 3.03 3.65 P/E Ratio 22.40 21.09 18.43 18.23 13.82 18.794 CF Per Share 3.42 3.51 4.05 4.32 4.95 P/CF Ratio 16.37 15.14 12.93 12.79 10.19 13.484 Sales Per Share 14.51 14.62 16.72 19.40 19.70 P/S Ratio 3.86 3.64 3.13 2.85 2.56 3.208

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