The industry P/E ratio is estimated to be 15.35 in which a target company has sales of $5.5 million,earnings of $2.75 million,and cash flows to equity of $1.12 million.Based on these numbers,what is the valuation of the target company?

Question

Quizplus · Accepted Answer

The P/E ratio is 15.35,So the price (or value)of the target company with earnings of $2.75 million can be estimated as 15.35 x 2.75 = $42.2125 million.

The Industry P/E Ratio Is Estimated to Be 15