An analyst has determined that the intrinsic value of Dell stock is $34 per share using the capitalized earnings model.If the typical P/E ratio in the computer industry is 27, then it would be reasonable to assume the expected EPS of Dell in the coming year will be

Question

Quizplus · Accepted Answer

Using the capitalized earnings model, we can find the expected EPS by dividing the intrinsic value by the industry P/E ratio:
Expected EPS = Intrinsic Value / P/E Ratio
Expected EPS = $34 / 27
Expected EPS = $1.26
Therefore, the expected EPS of Dell in the coming year is $1.26.

An Analyst Has Determined That the Intrinsic Value of Dell