The Claremont Company is planning an initial public offering (IPO) and management would like to have an
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Question:
The Claremont Company is planning an initial public offering (IPO) and management would like to have an idea of an appropriate price to charge for a share of its stock.
The company plans to issue 100,000 shares. The Claremont Company’s most recent earnings per share (EPS) are $1.25; however, the consensus forecast among analysts who follow the company is for EPS to be $1.50.
The EPS and share price of four comparable firms are shown below:
Firm | EPS | Share Price | P/E ratio |
---|---|---|---|
A | $1.00 | $18.00 | 18 |
B | 0.60 | 13.20 | 22 |
C | 10.00 | 140.00 | 14 |
D | 2.20 | 57.20 | 26 |
Compute the value of a share of Claremont Company stock using the price-earnings multiples method.
Trailing P/E multiple valuation | |
Forward P/E multiple valuation |
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
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