Question

# Company Ticker Price per Share Earnings per Share Book Value per Share Abbott Labs ABT 54.35...

Company Ticker Price per Share Earnings per Share Book Value per Share Abbott Labs ABT 54.35 3.69 13.79 Bristol-Myers-Squibb BMY 25.45 1.93 7.33 GlaxoSmithKline GSK 41.3 3.15 6.03 Johnson & Johnson JNJ 62.6 4.58 18.27 Merck MRK 36.25 3.81 10.86 Pfizer PFE \$18.30 \$1.20 8.19 Assuming that Novartis AG (NVS) has an EPS of \$3.35, based upon the average P/E ratio for its competitors, Novartis' stock price is closest to: \$44.35 \$13.00 \$31.86 \$43.47

Novartis' Stock Price

 Company Price per share Earnings per share P/E Ratio (a) (b) (c)= (a) / (b) Abbott Labs 54.35 3.69 14.73 Bristol-Myers-Squib 25.45 1.93 13.19 GlaxoSmithKlin 41.30 3.15 13.11 Johnson & Johnson 62.60 4.58 13.67 Merck 36.25 3.81 9.51 Pfizer 18.30 1.20 15.25 TOTAL 79.46

Average PE Ratio = 13.24 Times [79.46 / 6]

Therefore, Novartis' stock price the based on the average P/E Ratio = Earnings per share x Average P/E Ratio

= \$3.35 per share x 13.24 Times

= \$44.35 per share

“Hence, the Novartis' stock price is closest to \$44.35”