Exhibit 9-3
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)
Harcourt Industries currently has an 18% annual growth rate while the market average is 8%. The market multiple is 12.
-Refer to Exhibit 9-3. Determine the justified P/E ratio for Harcourt Industries assuming Harcourt can maintain its superior growth rate for the next 9 years.
A) 5.98
B) 13.13
C) 21.20
D) 58.68
E) 26.65

Question

Quizplus · Accepted Answer

ln (X) = 9 ln (1.18/1.08)
ln (X) = 9 ln (1.093)
ln (X) = 9 (.089) = .801 X = 2.22
The P/E would be 2.22 ´ 12 = 26.65

Exhibit 9-3 USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)