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XYZ Company stock is selling for $28

Finance

XYZ Company stock is selling for $28.00 per share, with earnings per share of $3.20. ABC Company is a firm comparable to XYZ. ABC Company has earnings per share of $4.25. What would be a good estimate of the price per share of ABC Company?

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The price is computed as shown below:

= (Price of XYZ / Earnings per share of XYZ) x Earnings per share of ABC

= ($ 28.00 / $ 3.20) x $ 4.25

= 8.75 x $ 4.25

= $ 37.1875

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