Suppose that the average P/E multiple in the oil industry is 20.Dominion Oil is expected to have an EPS of $3.00 in the coming year.The intrinsic value of Dominion Oil stock should be _____.
A)$28.12
B)$35.55
C)$60.00
D)$72.00
E)none of the above

Question

Quizplus · Accepted Answer

The intrinsic value of Dominion Oil stock can be calculated as follows:
Intrinsic Value = EPS x P/E multiple
Intrinsic Value = $3.00 x 20
Intrinsic Value = $60.00
Therefore, the intrinsic value of Dominion Oil stock is $60.00.

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