Table 7 Comparables Company 1 21.00 7.4 2.5 Company 2 22.50 7.8 2.1 Company 3 18
ID: 2802336 • Letter: T
Question
Table 7 Comparables Company 1 21.00 7.4 2.5 Company 2 22.50 7.8 2.1 Company 3 18.50 6.6 2.7 P/E P/BV P/S High Tech EPS BV per share Sales per share 2.00 10.10 15.00 39. Use comparables to estimate the stock price for High Tech. Table 7 displays the comparable valuation ratios and the financial data for High Tech. A. $91.44 B. $57.36 C. $50.41 D. $41.33 40. Use Table 7. Assume company 1 and company 3 are in the tech sector and company 2 is in the consumer staples sector. Value High Tech based on the comparables approach with this new information A. $39.50 B. $49.73 C. $50.41 D. $39.00Explanation / Answer
39) Average P/E = (21 + 22.5 + 18.5) / 3 = 20.67
Price based on P/E = P/E x EPS = 20.67 x 2 = $41.33
Average P/BV = (7.4 + 7.8 + 6.6) / 3 = 7.27
Price based on P/BV = 7.27 x 10.1 = $73.39
Average P/S = (2.5 + 2.1 + 2.7) / 3 = 2.43
Price based on P/S = 2.43 x 15 = $36.5
Average of all three prices = (41.3 + 73.39 + 36.5) / 3 = $50.41
40) If Company 2's valuation is eliminated from the above calculation, we get price = $49.73
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