Sharell observes a private firm (PRV) which will soon be going public in an IPO.

She wants to use the Comps method to estimate a shareprice for PRV. She believes that, based on cash flow, risk and growth, PRV is similar to a public firm (PBL). PBL

that has a long record of market shareprices and reported earnings. Sharell uses rough sales and expense estimates to recreate what earnings PRV would have

reported had it had to file official forms. Sharell obtains an estimate of $3.45 earnings for each new IPO share in the offering. Switching focus now to PBL, last year it reported earnings per share of $1.86 and today, its shares currently sell for $28.46. Using a Comps PE approach, what current value would Sharell assign to the IPO shares of PRV?

See the A1 notes for a discussion about the Comparables Approach.

A. $15.34

B. $27.77

C. $40.06

D. $52.79