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 P/E ratio for Harcourt Industries assuming Harcourt can maintain its superior growth rate for the next 3 years.
A) 4.25
B) 12.50
C) 15.67
D) 30.10
E) 42.80

Question

Quizplus · Accepted Answer

ln (X) = 3 ln (1.18/1.08)
ln (X) = 3 ln (1.093)
ln (X) = 3 (.089) = .269 X = 1.306
The P/E would be 12 ´ 1.306 = 15.67

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