so.2 Richmond Rent-A-Car is about to go public. The investment banking firm of Tinkers, Evers & Chance is attempting to price the issue.The car rental industry generally trades at a 12 percent discount below the P/E ratio on the Standard & Poor's 500 Stock Index.Assume that the index currently has a P/E ratio of 15. The firm can be compared to the car rental industry as follows:Growth rate in earnings per shareConsistency of performanceDebt to total assetsTurnover of productQuality of managementX Answer is complete but not entirely correct.Richmond14%Initial P/E ratioIncreased earnings 4 out of 5 yearsOn this basis, what should the initial P/E be for the firm?Note: Round your answer to 1 decimal place.15.3 x35%Slightly below averageHighAssume, in assessing the initial P/E ratio, the investment banker will first determine the appropriate industry P/E based on the Standard& Poor's 500 Index. Then a 0.50 point will be added to the P/E ratio for each case in which Richmond Rent-A-Car is superior to theindustry norm, and a 0.50 point will be deducted for an inferior comparison.Car Rental Industry10%Increased earnings 3 out of 5 years40%AverageAverage

The price-to-earnings (P/E) ratio is a financial metric used to evaluate the relative value of a…

Richmond Rent-A-Car is about to go public. The investment banking firm of Tinkers, Evers & Chance is attempting to price the issue. The car rental industry generally trades at a 12 percent discount below the P/E ratio on the Standard & Poor's 500 Stock Index. Assume that the index currently has a P/E ratio of 15. The firm can be compared to the car rental industry as follows: Growth rate in earnings per share Consistency of performance Debt to total assets Turnover of product Quality of management Richmond 14% > Answer is complete but not entirely correct. Initial P/E ratio Increased earnings 4 out of 5 years 35% Slightly below average High Assume, in assessing the initial P/E ratio, the investment banker will first determine the appropriate industry P/E based on the Standard & Poor's 500 Index. Then a 0.50 point will be added to the P/E ratio for each case in which Richmond Rent-A-Car is superior to the industry norm, and a 0.50 point will be deducted for an inferior comparison. On this basis, what should the initial P/E be for the firm? Note: Round your answer to 1 decimal place. 15.3 x Car Rental Industry. 10% Increased earnings 3 out of 5 years 40% Average Average