An analyst has determined that the intrinsic value of Dell stock is $34 per share using the capitalized earnings model.If the typical P/E ratio in the computer industry is 27,then it would be reasonable to assume the expected EPS of Dell in the coming year is ______.
A)$3.63
B)$4.44
C)$14.40
D)$1.26
E)none of the above

Question

Quizplus · Accepted Answer

The intrinsic value is calculated as P/E ratio multiplied by EPS. Given the intrinsic value is $34 and P/E is 27, the expected EPS is $34 / 27 = $1.26.

An Analyst Has Determined That the Intrinsic Value of Dell