Question

Identify and elaborate the main difficulties associated with Price Earnings (P:E) Ratio and Discounted Cash Flow...

Identify and elaborate the main difficulties associated with Price Earnings (P:E) Ratio and Discounted Cash Flow (DCF) for valuing companies which are not quoted in the Stock Market?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The main difficulties associated with PE ratio and DCF for valuing companies which are not quoted in the Stock Market are :

  • As the shares are not traded in the stock market, the market price is not known. The PE ratio is difficult to estimate because the market value per share cannot be known. It can only be estimated, but with uncertainty.
  • The cost of equity is difficult to determine because the share price is unknown. The beta of the stock is also difficult to estimate for the same reason
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Identify and elaborate Price earnings (P:E) ratio and provide one example.
Identify and elaborate Price earnings (P:E) ratio and provide one example.
An analyst tells you that he uses price/earnings multiples, rather than discounted cash flow valuation, to...
An analyst tells you that he uses price/earnings multiples, rather than discounted cash flow valuation, to value stocks, because he does not like making assumptions about fundamentals - growth, risk, and payout ratios. Is his reasoning correct?
Which of the following statements is most accurate: A. Discounted Cash Flow analysis models provide conclusions...
Which of the following statements is most accurate: A. Discounted Cash Flow analysis models provide conclusions associated with Fair Value Hierarchy Level 1 inputs. B. Price / Earnings multiples directly provide insights into the total company, the TEV. C. Generally, (EBIT) and (EBITDA) multiples directly provide insight into the equity value. D. Price / Earnings multiples provide insights into the value of the equity.
Prompt: Price/cash flow ratio – Please write a paper about the price/cash flow ratio. Why has...
Prompt: Price/cash flow ratio – Please write a paper about the price/cash flow ratio. Why has it become a popular measure of relative value during the recent past? What factors help explain a difference in this ratio for two firms? Requirements: 500 words
1. Which of the following is a solvency ratio? A. Debt ratio B. Earnings per share...
1. Which of the following is a solvency ratio? A. Debt ratio B. Earnings per share C. Gross profit percentage D. Cash conversion cycle 2. Two measures that are often looked at in valuing a business are: A. Price Earnings Ratio and Dividend per Share. B. Price Earnings Ratio and Dividend Yield. C. Earnings per Share and Dividend Yield. D. Earnings per Share and Dividend per Share.
1. Among the following statements, only 3 are correct with respect to corporate valuations. Identify which...
1. Among the following statements, only 3 are correct with respect to corporate valuations. Identify which ones. a)      There are several potential values for a single company b)      Valuation combines business and financial analysis, as well as the use of valuation methodologies c)      The value of a company with stable earnings does not change over time d)      Valuation is only based on future earnings projections, one does not take into account current or historical performance at all 2. Which of...
What are the main problems with valuation by price-earnings ratios? Check all that apply: A.Corporate debt...
What are the main problems with valuation by price-earnings ratios? Check all that apply: A.Corporate debt changes the price-earnings ratio. B.It is difficult to find comparable firms. C.Some P/E ratios are calculated for the company overall, while others are calculated on a per share basis. D.Different companies might use different accounting methods.
Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements...
Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year: Common stock, $15 par value (no change during the year) $3,900,000 Preferred $5 stock, $100 par (no change during the year) 3,000,000 The net income was $982,000 and the declared dividends on the common stock were $65,000 for the current year. The market price of the common stock is $22.40 per share. For...
Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements...
Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year: Common stock, $25 par value (no change during the year) $5,500,000 Preferred $5 stock, $200 par (no change during the year) 6,000,000 The net income was $678,000 and the declared dividends on the common stock were $55,000 for the current year. The market price of the common stock is $18.00 per share. For...
Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements...
Earnings per Share, Price-Earnings Ratio, Dividend Yield The following information was taken from the financial statements of Tolbert Inc. for December 31 of the current fiscal year: Common stock, $15 par value (no change during the year) $2,400,000 Preferred $10 stock, $200 par (no change during the year) 4,000,000 The net income was $712,000 and the declared dividends on the common stock were $40,000 for the current year. The market price of the common stock is $24.00 per share. For...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT