Exhibit 14.3
Use the Information Below for the Following Problem(S)
Harcourt Industries currently has an 18% annual growth rate while the market average is 8 percent. The market multiple is 12.
-Refer to Exhibit 14.3.Determine the P/E ratio for Harcourt Industries assuming Harcourt can maintain its superior growth rate for the next 3 years.
A) 4.25
B) 12.50
C) 15.67
D) 30.10
E) 42.80

Question

Quizplus · Accepted Answer

ln (X)= 3 ln (1.18/1.08)
ln (X)= 3 ln (1.093)
ln (X)= 3 (.089)= .269 X = 1.306
The P/E would be 12 × 1.306 = 15.67

Exhibit 14.3 Use the Information Below for the Following Problem(S)