BP p.l.c. (London: BP) is one of the worlds largest integrated oil producers. As of early September

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BP p.l.c. (London: BP) is one of the world’s largest integrated oil producers. As of early September 2013, the company continued to deal with litigation concerns surrounding its role in a 2010 drilling rig accident. Jan Unger, an energy analyst, forecasts a longterm earnings retention rate, b, for BP of 10 percent and a long-term growth rate of 3 percent. Given the significant legal uncertainties still facing BP shareholders, Unger estimates a required rate of return of 12.5 percent. Based on Unger’s forecasts of fundamentals and Equation 1, BP’s justified forward P/E is

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Equity Asset Valuation

ISBN: 9781119850519

3rd Edition

Authors: Jerald E Pinto, CFA Institute

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