Compute the value of a share of Claremont Company

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Question - Valuation Using Price-Earnings Multiples

The Claremont Company is planning an initial public offering (IPO) and management would like to have an idea of an appropriate price to charge for a share of its stock.

The company plans to issue 100,000 shares. The Claremont Company's most recent earnings per share (EPS) are $1.55; however, the consensus forecast among analysts who follow the company is for EPS to be $1.65.

The EPS and share price of four comparable firms are shown below:

Firm

EPS

Share Price

P/E ratio

A

$1.00

$18.00

18

B

0.60

13.20

22

C

10.00

140.00

14

D

2.20

57.20

26

Compute the value of a share of Claremont Company stock using the price-earnings multiples method.

Reference no: EM132248507

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