Question

As an analyst you are hired to value Company A, a private high tech company. The...

As an analyst you are hired to value Company A, a private high tech company. The EPS for the company is $1.5 per share. The P/E for Company B is 20, Company C is 25, and Company D is 30. Company B and C are companies in the high tech industry where as Company D is in the automobile industry. Determine the price for Company A based on the comparables analysis. 


A. $30.50


B. $33.75


C. $37.50


D. $39.75

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Homework Answers

Answer #1
Company B and C are in the same industry and Company D belongs to different industry and hence
only Company B and Company C PE ratio will be considered
Average PE of both Company B and C= (20+25)/2
Average PE of both Company B and C= 22.5
EPS $                                      1.50
Estimated price= EPS * Average PE ratio
Estimated price= 1.50*22.5
Estimated price= $                                    33.75
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