Purchase Solution

Estimating the price of given stock

Not what you're looking for?

Ask Custom Question

You have the following information on Proctor & Gamble (PG) and Johnson & Johnson (JNJ):

PG: P-E (which is Price/EPS) = 22.42
JNJ: EPS = 3.14

a. Using PG as a comparable, estimate JNJ's price: ______________
b. The current price of JNJ is about $69.50 per share. How does your estimate compare to the current price (high, low or about the same)? ___________________________
c. What is one problem with using a comparable (such as PG) to estimate the price of another firm (such as JNJ)?

Purchase this Solution

Solution Summary

The solution describes the steps to estimate the price of given stock by using comparable. It also discusses the problems of using this method.

Solution Preview

a. Using PG as a comparable, estimate JNJ's price.

JNG Price=PE*EPS=22.42*3.14=70.40
We have used PE ratio of PG as it is comparable.

b. The current price of JNJ is about $69.50 ...

Solution provided by:
Education
  • BEng (Hons) , Birla Institute of Technology and Science, India
  • MSc (Hons) , Birla Institute of Technology and Science, India
Recent Feedback
  • "Thank you"
  • "Really great step by step solution"
  • "I had tried another service before Brain Mass and they pale in comparison. This was perfect."
  • "Thanks Again! This is totally a great service!"
  • "Thank you so much for your help!"
Purchase this Solution


Free BrainMass Quizzes
Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.