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PE ratio

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › PE ratio

  • This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • February 27, 2019 at 3:32 pm #506710
    gaya3790
    Participant
    • Topics: 11
    • Replies: 9
    • ☆

    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

    February 27, 2019 at 4:05 pm #506726
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51909
    • ☆☆☆☆☆

    Surely you must have an answer in the same book in which you found the question!!

    Your answer seems OK to me 🙂

    February 28, 2019 at 3:26 am #506785
    gaya3790
    Participant
    • Topics: 11
    • Replies: 9
    • ☆

    But sir I didn’t understand what they are asking, that’s confusing me

    February 28, 2019 at 9:46 am #506815
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51909
    • ☆☆☆☆☆

    They are asking why Fencer might be prepared to at least 10 times the EPS of Seed for the shares in Seed.

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