Mr. Hawk, an analyst at Ruckus Investments, is analyzing Aspen Corporation (current stock price is $16.25) using market multiples. He plans to start with a look at the firm's price-to-earnings (P/E) ratios. Ruckus Investments requires that all research reports include an estimate of the earnings for the upcoming (next) quarter and for the next year. Hawk has gathered historical and estimated income statement information in Exhibit 3, and actual results for Aspen and some of its competitors in Exhibit 4. Exhibit 3: Aspen Corp. Net Income 1Q 2009 Actual $2.3 mil. 2Q 2009 Actual $2.0 mil. 3Q 2009 4Q 2009 Actual $2.1 mil. Actual $2.6 mil 1Q 2010 Estimated $2.5 mil 2010 Year Estimated $10.1 mil. Common Stock $1.0 mil. $1.0 mil. $1.0 mil. $1.0 mil. $1.1 mil. $4.4 mil. Dividends Shares 10 mil. 10 mil. 10 mil. 10 mil. 10 mil. 10 mil. Outstanding Exhibit 4: Aspen Corp. Industry Group Current Stock Price Total Interest Sales (after- Earnings Total Assets Common Equity Shares Outstanding Aspen Corp. $16.25 tax) $150 mil. $5.0 mil. $9.0 mil. Vail Corp. $30.50 $109 mil. $2.4 mil. $8.2 mil. Breck Corp. $14.33 $172 mil. $0.6 mil. $18.6 mil. Telluride Corp. $108.40 $177 mil. $5.4 mil. $23.8 mil. $208 mil. $150 mil. $175 mil. $355 mil. $98 mil. 10 mil. $82 mil. 5 mil. $155 mil. 15 mil. $265 mil. 3 mil. Using the comparable company data provided, Hawk calculates an estimated fair value for Aspen based on a P/S multiple approach. He believes it is best to not use Aspen's P/S when calculating the average P/S for the comparables. The fair per share price using a P/S multiple approach is closest to: 1.5 13.15 20.85 Correct Answer 22.5