• The following information relates to Hereford, Inc.

• 	Price/Share	Earnings/Share	Book Value/Share
  Industry average	$120	$4.00	$20
  Hereford, Inc.	$140	$5.00	$24

  • The price-earnings (P-E) multiple for this industry =
  • Hereford’s estimated share price based on the P-E multiple =
  • The price-book value (P-BV) multiple for this industry =
  • Hereford’s estimated share price based on the P-BV multiple =
  • Based on this analysis, would you recommend that investors buy, hold, or sell shares of Hereford stock?

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  • Explain why you would make that recommendation.    
  • Discuss the advantages of using P-E multiples to estimate a firm’s share price:
  • Discuss the disadvantages of using P-E multiples to estimate a firm’s share price:
  • Discuss the advantages of using P-BV multiples to estimate a firm’s share price:
  • Discuss disadvantages of using P-BV multiples to estimate a firm’s share price:
  • If Hereford has a 12% ROE and pays out 20% of its income as dividends, what is its sustainable growth rate (SGR)?
  • What does this sustainable growth rate tell you about Hereford?

Answer rating: 100% (QA)

PE ratio for Hereford inc 28 PE ratio for industry 30 PriceBook value For Hereford inc 14024583 For ... View the full answer