Suppose Air Canada has a current share price of $10.50 and an EPS of 1.12.Its competitor,WestJet,has an EPS of 3.13.Using the method of comparables,what is the expected price of WestJet stock?

Question

Quizplus · Accepted Answer

To find the expected price of WestJet stock using the method of comparables, we first calculate the Price-to-Earnings (P/E) ratio of Air Canada, which is the share price divided by the EPS. For Air Canada, the P/E ratio is $10.50 / 1.12 = 9.375. To find the expected price of WestJet stock, we multiply WestJet's EPS by the P/E ratio of Air Canada: 3.13 * 9.375 = $29.34.

Suppose Air Canada Has a Current Share Price of $10