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

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 2MAD

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