Exhibit 9-2
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Modular Industries currently has a 16% annual growth rate while the market average is 6%. The market multiple is 10.
-Refer to Exhibit 9-2. Determine the P/E ratio for Modular Industries assuming Modular can maintain its superior growth rate for the next 8 years.
A) 6.4
B) 20.5
C) 16.5
D) 23.8
E) 29.5

Question

Quizplus · Accepted Answer

ln (X) = 8 ln (1.16/1.06)
ln (X) = 8 ln (1.094)
ln (X) = 8 (.090) = 0.72 X = 2.05
The P/E would be 10 ´ 2.05 = 20.5

Exhibit 9-2 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)