Suppose that the average P/E multiple in the oil industry is 20. Non-Standard Oil Corp is expected to have an EPS of $3.00 in the coming year. The intrinsic value of Non-Standard Oil Corp stock should be
A) $28.12.
B) $35.55.
C) $60.00.
D) $72.00.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

The intrinsic value of Non-Standard Oil Corp stock can be calculated by multiplying the expected EPS by the average P/E multiple in the industry. Thus, $3.00 * 20 = $60.00.

Suppose That the Average P/E Multiple in the Oil Industry