Consider three corporati same industry. In genera in this industry have a PE

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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9

Consider three corporations in the
same industry. In general, corporations
in this industry have a PE ratio of 15.
Corporation A has a share price of $55
and earnings per share of $3.50
Corporation B has a share price of $95
and earnings per share of $6.25
Corporation C has a share price of $20
and earnings per share of $1.80
a) Use this information to calculate the
intrinsic value per share of each
corporation.
b) Based on this information, which of
these corporations would a
fundamental analyst think was the best
investment?
Transcribed Image Text:Consider three corporations in the same industry. In general, corporations in this industry have a PE ratio of 15. Corporation A has a share price of $55 and earnings per share of $3.50 Corporation B has a share price of $95 and earnings per share of $6.25 Corporation C has a share price of $20 and earnings per share of $1.80 a) Use this information to calculate the intrinsic value per share of each corporation. b) Based on this information, which of these corporations would a fundamental analyst think was the best investment?
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