An investor is deciding whether to purchase 5,000 ABC Inc. shares which has an EPS ratio of P75. He would like to compare ABC with the average price-earnings ratio of three of its closest competitors. The following are the details of the competitors. X Inc. Y Co. Z Corp. Market value per share 564.00 P 2,367.00 P 142.00 Divided by: Earnings per share 103.00 412.00 23.00 P-E Ratio 5.48 P 5.75 P 6.17 Average PE of competitors 5.80 The investor expects ABC's relative value to increase by 10% each year. If the investor would like to sell his investment in ABC by the end of 5 years but expects to incur a cost to sell of P500,000 due to low tradeability, how much should the investor pay for each share now?

An investor is deciding whether to purchase 5,000 ABC Inc. shares which has an EPS ratio of P75. He would like to compare ABC with the average price-earnings ratio of three of its closest competitors. The following are the details of the competitors. X Inc. Y Co. Z Corp. Market value per share 564.00 P 2,367.00 P 142.00 Divided by: Earnings per share 103.00 412.00 23.00 P-E Ratio 5.48 P 5.75 P 6.17 Average PE of competitors 5.80 The investor expects ABC's relative value to increase by 10% each year. If the investor would like to sell his investment in ABC by the end of 5 years but expects to incur a cost to sell of P500,000 due to low tradeability, how much should the investor pay for each share now?

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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