Question

In: Finance

PepsiCo (PEP) has a stock price of $72.00 and EPS of $3.80. Its competitor and close...

  1. PepsiCo (PEP) has a stock price of $72.00 and EPS of $3.80. Its competitor and close comparable firm, the Coca-Cola Company (KO), has EPS of $1.90. Estimate the value of a share of Coca-Cola stock using only this data.

    a.

    $144.00
    b.

    $136.80
    c.

    $36.00
    d.

    $9.11

Solutions

Expert Solution

The correct answer is c. $36.00

To find the value of a share of Coca-Cola we will use PE ratio

PE ratio = Price of Share / Earnings per share (EPS)

As PepsiCo is a close comparable firm the PE ratio will be similar to Coca- Cola

Price of Share = $72.00

EPS = $3.80

PE ratio = $72.00 / $3.80

= 18.94737

Therefore value of share of Coca- Cola using PE ratio (Note - EPS of Coca- Cola = $1.90)

$18.94737 = Price of Share / $1.90

Price of Share = 18.94737 * $1.90

= $36.00

jeff jeffy answered 3 years ago
Next > < Previous

Related Solutions

Listed below is the selling price for a share of PepsiCO Inc. at the close of...
Listed below is the selling price for a share of PepsiCO Inc. at the close of each year. Year             Price                            Year                Price 1990             12.9135                       2000                49.5625 1991             16.8250                       2001                48.6803 1992             20.6125                       2002                42.2211 1993             20.3024                       2003                46.6215 1994             18.3160                       2004                52.2019 1995             27.7538                       2005                59.8534 1996             29.0581                       2006                62.0002 1997             36.0155                       2007                77.5108 1998             40.6111                       2008                54.7719 1999             35.0230                       2009                60.8025 a. Plot the data. b. Use EXCEL’s Data Analysis add-in to determine the least squares trend equation. c. Discuss the regression...
On a particular date, a company has a stock price of $24.17 and an EPS of...
On a particular date, a company has a stock price of $24.17 and an EPS of $ 2.89. Its competitor had a stock price of $20.57. What would be the expected EPS of their competitor's stock on this date, if estimated using the method of comparables? A. 1.36 B. 4.77 C. 3.60 D. 2.46
A 3.80 percent coupon municipal bond has 10 years left to maturity and has a price...
A 3.80 percent coupon municipal bond has 10 years left to maturity and has a price quote of 94.35. The bond can be called in four years. The call premium is one year of coupon payments. (Assume interest payments are semiannual and a par value of $5,000.) Compute the bond’s current yield. (Round your answer to 2 decimal places.) Compute the yield to maturity. (Round your answer to 2 decimal places.) Compute the taxable equivalent yield (for an investor in...
ABC Corp. has earnings of $0.54 per share. XYZ Corp. is a close competitor, with $1.01...
ABC Corp. has earnings of $0.54 per share. XYZ Corp. is a close competitor, with $1.01 earnings per share. If XYZ stock is currently trading at $29.76 and you believe that the stocks are comparable, what would be a reasonable price expectation for ABC stock?
ABC Corp. has earnings of $0.54 per share. XYZ Corp. is a close competitor, with $1.01...
ABC Corp. has earnings of $0.54 per share. XYZ Corp. is a close competitor, with $1.01 earnings per share. If XYZ stock is currently trading at $29.76 and you believe that the stocks are comparable, what would be a reasonable price expectation for ABC stock?
Suppose that the price of gold at close of trading yesterday was $600 and its volatility...
Suppose that the price of gold at close of trading yesterday was $600 and its volatility was estimated as 1.3% per day. The price at the close of trading today is $605. Moreover, the price of silver at the close of trading yesterday was $16, its volatility was estimated as 1.5% per day, and its correlation with gold was estimated as 0.8. The price of sliver at the close of trading today is unchanged at $16. a. Update the volatilities...
Stock price = $40, dividend paid =$2, EPS = $4, so : A. dividend payout ratio...
Stock price = $40, dividend paid =$2, EPS = $4, so : A. dividend payout ratio =5% b dividend yield =5% c. dividend yield =50% d. P-E=20 e None of the above
A company has granted 2,000,000 options to its employees. The stock price and strike price are...
A company has granted 2,000,000 options to its employees. The stock price and strike price are both $70. The options last 8 years and vest after 2 years. The company decides to value the options using an expected life of 6 years and a volatility of 30% per annum. Dividends on the stock are $1.50 per year, payable halfway through each year, and the risk-free is 5%. What will the company report as an expense for the options on its...
Suppose you short sell a stock at price $40. If you close the position at $20,...
Suppose you short sell a stock at price $40. If you close the position at $20, your profit is $_______. If you close the position at $45, your loss is $_____. Can someone explain how I would go about figuring this out?
Bank Share Prices: If The Bank’s share price relative to book value was below its competitor...
Bank Share Prices: If The Bank’s share price relative to book value was below its competitor banks by about 25%. Management made it clear that it believed the share price was undervalued, as opposed to low - valued due to a lack of investor confidence. Make assumptions as to why the bank's share price was relative to book value less than competitors? give a recommendation Make an assumption why it was undervalued was it due to investors confidence why? give...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT