Question
You are estimating the price-earnings multiple to use to value Paramount Corporation by looking at the average price-earnings multiple of comparable firms. The following are
You are estimating the price-earnings multiple to use to value Paramount Corporation by looking at the average price-earnings multiple of comparable firms. The following are the price-earnings ratios of firms in the entertainment business.
Firm PE Ratio Disney (Walt) 22.09 Time Warner 36.00 King World Productions 14.10 New Line Cinema 26.70
a. What is the average PE ratio? b. Would you use all the comparable firms in calculating the average? Why or why not? c. What assumptions are you making when you use the industry-average PE ratio to value Paramount Corporation?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Cases in Finance
Authors: Jim DeMello
3rd edition
1259330476, 1259330478, 9781259352652 , 978-1259330476
