XYZ is a privately held firm whose forecasted earnings per share (EPS) are $5.42, and suppose...

XYZ is a privately held firm whose forecasted earnings per share (EPS) are $5.42, and suppose the average price/earnings (P/E) ratio for a set of similar publicly traded companies is 14.7. Estimate the intrinsic value of XYZ stock.

(Round your answer to the nearest 2 decimal points. For example, if your answer is $12.345, then enter 12.35 in the answer box.)

Solutions

Expert Solution

Given,

EPS of XYZ Ltd = 5.42$

Price/earnings ratio = 14.7

Calculation of intrinsic value of stock:

P/E ratio = MPS/EPS

14.7 = MPS/5.42

MPS = 14.7*5.42

= 79.674$ or 79.67$

Intrinsic value of stock = 79.67$

Note :

MPS = market price per share

EPS = Earnings per share

jeff jeffy answered 2 years ago

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