# Question

The average P/E ratio for the industry that Health Science, Inc. is in is currently 24. If the company has a P/E ratio 20 percent higher than the industry ratio of 24 in 2012 and 25 percent higher than the industry ratio (also of 24) in 2013:

a. Indicate the appropriate P/E ratios for the firm in 2012 and 2013.

b. Combine this with the earnings per share data in problem 17 to determine the anticipated stock price for 2012 and 2013. Round to two places.

a. Indicate the appropriate P/E ratios for the firm in 2012 and 2013.

b. Combine this with the earnings per share data in problem 17 to determine the anticipated stock price for 2012 and 2013. Round to two places.

## Answer to relevant Questions

Relating to problems 17 and 18, determine the price range in 2013 if the P/E ratio is between 27 and 33. Assume D1 = $1.60, Ke = 13 percent, g = 8 percent. Using Formula 7–5 on page 168, for the constant growth dividend valuation model, compute P0. Explain the probable impact of replacement-cost accounting on the ratios of return on assets, debt to total assets, and times interest earned for a firm that has substantial old fixed assets. In problem 10, if total debt were increased to 50 percent of assets and interest payments went up by $300, what would be the new value for return on equity? A firm has assets of $1,800,000 and turns over its assets 2.5 times per year. Return on assets is 20 percent. What is its profit margin (return on sales)?Post your question

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