Question

    Aqua Ltd. just declared the earnings of Rs. 23 per

    share. The company is involved in the manufacture of cars. The average PE of electronics industry is 1.2. The average PE of car manufacturing industry is 1.5. Based on the information above, what must be the fair price for one stock of Aqua Ltd.
    A 23.5 Correct Answer Incorrect Answer
    B 27.6 Correct Answer Incorrect Answer
    C 34.5 Correct Answer Incorrect Answer
    D 27.6 Correct Answer Incorrect Answer
    E 31.4 Correct Answer Incorrect Answer

    Solution

    We will use the PE of same industry i.e. 1.5 PE = Price / Earnings 1.5 = Price / 23 Price = 34.5

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