Am I correct in my calculations: Suppose that in July 2013, Nike Inc. had EPS of $2.28 and a book value of equity of $13.01 per share. Average 29.84 2.44 Maximum +136% +70% Minimum −62% −63% Using the average P/E multiple from the table above, estimate Nike's share price. Estimate a value of stock using P/E valuation: 29.84 x 2.28 = 68.0352 = $68.04 What range of share prices do you estimate based on the highest and lowest P/E multiples in the table above? Highest P/E = $68.04 x 136% = $92.53 Lowest P/E = this is a negative % -62 and P/E does not have a negative number; it is invalid. Therefore, range would be $68.04 to $92.53 Using the average price to book value multiple in the table above, estimate Nike's share price. Estimate a value of stock using P/B book valuation: 2.44 x $13.01 = 31.7444 = $31.74 What range of share prices do you estimate based on the highest and lowest price-to-book value multiples in the table above? Highest P/B = $31.74 x 70% = $22.22 Lowest P/B = $31.74 x -63% = -19.9962 = -$20.00
Am I correct in my calculations: Suppose that in July 2013, Nike Inc. had EPS of $2.28 and a book value of equity of $13.01 per share. Average 29.84 2.44 Maximum +136% +70% Minimum −62% −63% Using the average P/E multiple from the table above, estimate Nike's share price. Estimate a value of stock using P/E valuation: 29.84 x 2.28 = 68.0352 = $68.04 What range of share prices do you estimate based on the highest and lowest P/E multiples in the table above? Highest P/E = $68.04 x 136% = $92.53 Lowest P/E = this is a negative % -62 and P/E does not have a negative number; it is invalid. Therefore, range would be $68.04 to $92.53 Using the average price to book value multiple in the table above, estimate Nike's share price. Estimate a value of stock using P/B book valuation: 2.44 x $13.01 = 31.7444 = $31.74 What range of share prices do you estimate based on the highest and lowest price-to-book value multiples in the table above? Highest P/B = $31.74 x 70% = $22.22 Lowest P/B = $31.74 x -63% = -19.9962 = -$20.00
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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Am I correct in my calculations:
Suppose that in July 2013, Nike Inc. had EPS of $2.28 and a book value of equity of $13.01 per share.
|
|
|||
|
Average |
29.84 |
2.44 |
|
|
Maximum |
+136% |
+70% |
|
|
Minimum |
−62% |
−63% |
- Using the average P/E multiple from the table above, estimate Nike's share price.
- Estimate a value of stock using P/E valuation: 29.84 x 2.28 = 68.0352 = $68.04
- What range of share prices do you estimate based on the highest and lowest P/E multiples in the table above?
- Highest P/E = $68.04 x 136% = $92.53
- Lowest P/E = this is a negative % -62 and P/E does not have a negative number; it is invalid. Therefore, range would be $68.04 to $92.53
- Using the average price to book value multiple in the table above, estimate Nike's share price.
- Estimate a value of stock using P/B book valuation: 2.44 x $13.01 = 31.7444 = $31.74
- What range of share prices do you estimate based on the highest and lowest price-to-book value multiples in the table above?
- Highest P/B = $31.74 x 70% = $22.22
- Lowest P/B = $31.74 x -63% = -19.9962 = -$20.00
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