An analyst has determined that the intrinsic value of HPQ stock is $20 per share using the capitalized earnings model.If the typical P/E ratio in the computer industry is 25,then it would be reasonable to assume the expected EPS of HPQ in the coming year is ______.
A)$3.63
B)$4.44
C)$0.80
D)$22.50
E)none of the above

Question

Quizplus · Accepted Answer

The intrinsic value of a stock using the capitalized earnings model is calculated as EPS multiplied by the P/E ratio. Given the intrinsic value is $20 and the P/E ratio is 25, the expected EPS is $20 / 25 = $0.80.

An Analyst Has Determined That the Intrinsic Value of HPQ