FORMULAS Price = (P/E) EPS: V=DkV-D/-):-) PE) - 11 E() + Al) - P/E - (t/earnings yield); V. - [ED) EP (**) Bp - WAS, - [E(9) Fij: Sp - [Elro) - Opi Pan - Cov(A. TOCO0 Cov (TAT) - PAOAOS: Capital Gain yield - [(Ps-PayPal: Dividend yield - DivIP HPR - (Ps-Pa). Divy/P.: HPR - Capital Gain Yield + Dividend Yield Arithmetic Average=Sum of returns in each period divided by number of periods Geometric Return = [(1+r) X (1+r) ... (1+r)]n - 1: E(rp) =EWE(); R=r+ E! Company A, an applications software firm, has an estimated 20% growth rate in earnings. Investors imparta Ple multiple of 20 for firm A. Company B. a residential construction firm, has an estimated growth rate in earnings of 8%. Investors impart a Ple multiple of 8 for firm B. In the next 12 months, Firm A is expected to earn $2.50/sh and Firm B is expected to earn $3.00/sh. The projected share price at the end of the year for Firm Als and for Firm B is $100: $40