Determine the trailing twelve-month price

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Reference no: EM133328417

Question:

Company 2 is an all-equity financed firm. It has the following financial information for the past 5 years 2017 2018 2019 2020 2021 £ £ £ £ £ Earnings per share 1.5 1.62 1.68 1.74 1.82 Share price at the end of the year 5.69 6.28 6.5 7.1 6.98 Company 2 usually publishes its financial statements one month after the end of the year. In other words, the public would only know the earnings for the year one month after the year end. In the last 5 years, Company 2 has paid out 50% of its earnings as dividend.

Required

(a) Determine the Trailing Twelve-Month Price to Earnings ratio (TTM P/E) for each of the last five years whenever the above data permits.

Comment on how well the Trailing P/E can be used in practice. (8 marks) (b) Determine the Forward Price to Earnings ratio (Forward P/E) for each of the last five years whenever the above data permits. Comment on how well the Forward P/E can be used in practice.

Reference no: EM133328417

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