Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

HS Ltd. has a stock price of $31.79 and is expected to grow at 14.1% per year. HS's P/E ratio is 14.3. Three other firms

image text in transcribed

HS Ltd. has a stock price of $31.79 and is expected to grow at 14.1% per year. HS's P/E ratio is 14.3. Three other firms are also expected to grow at a similar rate: General Electronic, Almo, and Cisko. The P/E ratio of these firms range from 11.16 to 12.91, with an average of 12.0. If investors decide that HS should be equally expensive as these other firms, price would the stock fall in order for it to have a P/E ratio of 12.0. What capital gain would result from this change in price

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Valuation Measuring and managing the values of companies

Authors: Mckinsey, Tim Koller, Marc Goedhart, David Wessel

5th edition

978-0470424650, 9780470889930, 470424656, 470889934, 978-047042470

More Books

Students also viewed these Finance questions