Hi Dear Tutor, I have a question as I confused when I find ,market value per share of the company, Corhig.
Why do I have to take year 1's earning for the calculation of market value share per share?
I took 4300 instead of 3000 ?
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Past paper question number 4 ?n June 2012
6y ago#1I assume you are asking about the PE valuation.
The PE ratio is based on the current earnings (which are 3,000) and the current market value. So the current market value is the PE ratio multiplied by the current earnings.
Yes, I am asking about P/E ration.
Now understood.Thank you very much dear Tutor.
Dear Tutor, at the same question part a's answer's third paragraph.
I can nit find $3.63 million?Could you explain what the third paragraph wants to tell us?
6y ago#4As the examiner writes in his answer, it is the average earnings per year (add them together and divide by 3).
As I explain in my lectures on this, using the PE ratio of similar companies assumes that investors are expected future growth to be the same as the similar companies. If shareholders in this company are expecting higher growth then the MV will be higher.
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