Suppose that the average P/E multiple in the chemicals industry is 26. Smart Chemical is expected tohave an EPS of S4.50 in the coming year. A reasonable estimate for intrinsic value of the stock shouldbe:A. None of the answers are correctB. $100.25C.$117.00D. $30.50E. $72.00

Intrinsic value is the actual true value of the stock of a particular company irrespective of the…

Suppose that the average P/E multiple in the chemicals industry is 26. Smart Chemical is expected to have an EPS of $4.50 in the coming year. A reasonable estimate for intrinsic value of the stock should be: A. None of the answers are correct B. $100.25 C.$117.00 D. $30.50 E. $72.00

Suppose that the average P/E multiple in the chemicals industry is 26. Smart Chemical is expected to have an EPS of $4.50 in the coming year. A reasonable estimate for intrinsic value of the stock should be: A. None of the answers are correct B. $100.25 C.$117.00 D. $30.50 E. $72.00

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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1. An analyst estimates that a stock will pay a $1 dividend next year and that it will sell for $40 at year-end. If the required rate of return is 14%, what is the value of the stock? A. $34.60. B. $35.52. C. $35.96.
If you look at stock prices over any year, you will find a high and low stock price for the year. Instead of a single benchmark PE ratio, we have a high and low PE ratio for each year. We can use these ratios to calculate a high and a low stock price for the next year. Suppose we have the following information on a particular company: High price Low price EPS Year 1 $ 62.18 40.30 2.35 a. High target price b. Low target price Year 2 $ 67.29 43.18 2.58 Year 3 $74.18 39.27 2.73 Year 4 $ 78.27 46.21 2.89 Earnings are expected to grow at 9 percent over the next year. a. What is the high target stock price in one year? Note: Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What is the low target stock price in one year? Note: Do not round Intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
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