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The P/E multiplier on Yahoo finance is 15
The P/E multiplier on Yahoo finance is 15. Last month three analysts announced they expected earnings per share for the coming year E1 to be about $2.00 per share The company announced today, earnings per share have rise and are $1.90 per share. As a result of this announcement the stock price will? "
Rise by $0.10 per share
Rise by $1.50 per share
Fall by $0.10 per share
Fall by $1.50 per share
Expert Solution
The share price ccan be calculated by the formula = EPS * Price/earnings per share
Expected share price before announcement = 2 * 15 = 30
Announced earnings per share = $ 1.90
Share price of share based on announcement = 1.90 * 15= 28.50
Share price fallen expectation = $ 30 - $ 28.50
= $ 1.50
So share price should fall by $ 1.50/Share
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