As of mid-September 2013, you are valuing Honda Motor Company (TSE: 7267;

NYSE ADR: HMC), among the market leaders in Japan’s auto manufacturing industry.

You are applying the method of comparables using HMC’s five-year average P/E as the benchmark value of the multiple. Exhibit 8 presents the data.

i. State a benchmark value for Honda’s P/E.

ii. Given EPS for fiscal year 2013 (ended 31 March) of ¥203.71, calculate and interpret a justified price for Honda.

iii. Compare the justified price with the stock’s recent price of ¥3,815.

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EXHIBIT 8 Historical P/Es for HMC 2012 2011 2010 2009 2008 Mean Median 15.8 23.1 10.0 19.8 35.8 20.9 19.8