# Earnings multiplier model

You are provided the following information about Javier Corporation. Sales for the year 2004 were $500,000: the Net Profit Margin (NPM) was 15%. Analysts project sales to grow by 12% next year (that is 2005).However because of more competition, the NPM is expected to decline by 10% for the year 2004. The expected P/E multiple for the year 2005 is 22. The total number of shares outstanding is 20,000.

Use the earnings multiplier model to calculate the expected price for Javier Corporation in the year 2005.

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#### Solution Preview

We need to first calculate the EPS for 2005

Sales in 2005 = 500,000 X 1.12 = ...

#### Solution Summary

This solution shows the steps to using the earnings multiplier model to calculate the expected price in the given accounting problem.

$2.19