USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Modular Industries currently has a 16 percent annual growth rate, while the market average is 6 percent. The market multiple is 10.
-Refer to Exhibit 9.11. Determine the P/E ratio for Modular Industries assuming Modular can maintain its superior growth rate for the next eight years.
A) 6.4
B) 20.5
C) 16.5
D) 23.8
E) 29.5

Question

Quizplus · Accepted Answer

The correct answer is B. The P/E ratio for Modular Industries assuming Modular can maintain its superior growth rate for the next eight years is 20.5. This is calculated by dividing the market multiple of 10 by the growth rate of 16 percent.