The common stock of NBC, Inc. has a normal P/E ratio of 16x. The company's ROA is expected to be 9% and ROE is expected to be 18%. The company's TATO ratio (Sales/TA) is 1.5x The company has 80,000 shares of common stock outstanding and its sales are estimated at $1,800,000. Calculate the expected price per share of the company's common stock. Ultra Petroleum (UPL) has earnings per share of $1.56 and a P/E ratio of 32.48. What is the stock price? Which one of the following will increase the price-earnings ratio, all else constant-all else constant? I. a decrease in the number of shares outstanding testing this answer. II. an increase in net income. III. a decrease in the earnings yield. IV. decrease in the market price per share
The common stock of NBC, Inc. has a normal P/E ratio of 16x. The company's ROA is expected to be 9% and ROE is expected to be 18%. The company's TATO ratio (Sales/TA) is 1.5x The company has 80,000 shares of common stock outstanding and its sales are estimated at $1,800,000. Calculate the expected price per share of the company's common stock. Ultra Petroleum (UPL) has earnings per share of $1.56 and a P/E ratio of 32.48. What is the stock price? Which one of the following will increase the price-earnings ratio, all else constant-all else constant? I. a decrease in the number of shares outstanding testing this answer. II. an increase in net income. III. a decrease in the earnings yield. IV. decrease in the market price per share
Chapter14: Investing In Stocks And Bonds
Section: Chapter Questions
Problem 1DTM
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Transcribed Image Text:The common stock of NBC, Inc. has a normal P/E ratio of 16x. The company's ROA is expected to
be 9% and ROE is expected to be 18%. The company's TATO ratio (Sales/TA) is 1.5x The
company has 80,000 shares of common stock outstanding and its sales are estimated at
$1,800,000. Calculate the expected price per share of the company's common stock. Ultra
Petroleum (UPL) has earnings per share of $1.56 and a P/E ratio of 32.48. What is the stock price?
Which one of the following will increase the price-earnings ratio, all else constant-all else constant? I.
a decrease in the number of shares outstanding testing this answer. II. an increase in net income. III.
a decrease in the earnings yield. IV. decrease in the market price per share
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