1)

A) Assume the appropriate P/E pricing multiple for the industry Guideline Public Companies is 32.09 times earnings. You have just analyzed the subject company and estimate the compounded earnings growth rate will be 0.75% higher than the industry GPS's (e.g. 5.75% versus GPC 5%). Compute the Risk Adjusted P/E multiple for the subject company. This involves adjusting the cap rate and then computing the multiple. Present your result to the second decimal place.

B) Assume the appropriate P/E pricing multiple for the industry Guideline Public Companies is 32.09 times earnings. You have just analyzed the subject company and estimate the cost of equity should be 2% higher than the industry GPS's (e.g. 10% versus GPC 8%). Compute the Risk Adjusted P/E multiple for the subject company. This involves adjusting the cap rate and then computing the multiple. Present your result to the second decimal place.