The shares of Fencer plc are currently valued on a P/E ratio of 8. The company is considering a takeover bid for Seed Limited, but the shareholders of Seed have indicated that they would not accept an offer unless it values their shares on a P/E multiple of at least 10.
Which THREE of the following are reasons which might justify an offer by Fencer plc for the shares of Seed on a higher P/E multiple?
A Fencer has better growth prospects than Seed
B Seed has better-quality assets than Fencer
C Seed has a higher gearing ratio than Fencer
D Seed is in a different country from Fencer, where average P/E ratios are higher
sir i am getting this question, ans:B and D
PE ratio
7y ago#1Surely you must have an answer in the same book in which you found the question!!
Your answer seems OK to me :-)
But sir I didn't understand what they are asking, that's confusing me
7y ago#3They are asking why Fencer might be prepared to at least 10 times the EPS of Seed for the shares in Seed.