You are working on an IPO for a tech company. It is expected that the company...
- You are working on an IPO for a tech company. It is expected that the company will have earnings of $10 per share next year. You are required to estimate its value. You have the following information about its peers. What would be a reasonable estimate of the value of this company? Show all calculations.
|
Peers |
Earnings per share |
Stock Price |
|
A |
$10 |
$500 |
|
B |
$15 |
$800 |
|
C |
$20 |
$1000 |
|
D |
$5 |
$250 |
|
E |
$1 |
$100 |
Homework Answers
Average Price/Earnings=(500/10+800/15+1000/20+250/5+100/1)/5=60.66666667
Hence,
Value=Price/Earnings*Earnings=60.66666667*10=606.6666667
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