Consider the following table of Earnings Components:     Firm A   Firm B   Firm C Reported EPS $ 12     $ 15     $ 18   Analyst’s EPS composition:                       Permanent component (βP = 5)   80 %     60 %     75 % Transitory component (βT = 1)   10 %     35 %     25 % Value-irrelevant component (β0 = 0)   10 %     5 %     0 %     The implied share price of Firm C’s stock is:   Multiple Choice   $18.00   $63.00   $72.00

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Consider the following table of Earnings Components:

 

  Firm A   Firm B   Firm C
Reported EPS $ 12     $ 15     $ 18  
Analyst’s EPS composition:                      
Permanent component (βP = 5)   80 %     60 %     75 %
Transitory component (βT = 1)   10 %     35 %     25 %
Value-irrelevant component (β0 = 0)   10 %     5 %     0 %
 

 

The implied share price of Firm C’s stock is:

 

Multiple Choice
  •  

    $18.00

  •  

    $63.00

  •  

    $72.00

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