q3- Alpha Ltd's current P/E ratio (as at 2018) is 17. The following table shows its P/E ratio for the previous 5 years. What is its average P/E for the period 2013 - 2017, and how would you describe the company's shares? Year P/E 2013 15.0 2014 17.9 2015 14.3 2016 14.5 2017 14.4
q3- Alpha Ltd's current P/E ratio (as at 2018) is 17. The following table shows its P/E ratio for the previous 5 years. What is its average P/E for the period 2013 - 2017, and how would you describe the company's shares? Year P/E 2013 15.0 2014 17.9 2015 14.3 2016 14.5 2017 14.4
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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q3-
Alpha Ltd's current P/E ratio (as at 2018) is 17. The following table shows its P/E ratio for the previous 5 years. What is its average P/E for the period 2013 - 2017, and how would you describe the company's shares?
| Year | P/E |
|---|---|
| 2013 | 15.0 |
| 2014 | 17.9 |
| 2015 | 14.3 |
| 2016 | 14.5 |
| 2017 | 14.4 |
a.
The historical average P/E is 15.20, and based on historical P/Es the share appears to be overpriced.
b.
The historical average P/E is 14.30, and based on historical P/Es the share appears to be overpriced.
c.
The historical average P/E is 15.20, and based on historical P/Es the share appears to be underpriced.
d.
The historical average P/E is 14.30, and based on historical P/Es the share appears to be underpriced.
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