Exhibit 1
Selected Stock Characteristics
Stock | Required Rate of Return | Next Year’s Forecasted EPS (C$) | Current Price per Share (C$) |
ABTD | 10.5% | 7.30 | 80.00 |
BKKQ | 8.0% | 2.12 | 39.00 |
CPMN | 12.0% | 1.90 | 27.39 |
Question
Q. Based on Exhibit 1, the growth component of the leading P/E is largest for:
- ABTD.
- BKKQ.
- CPMN.
Calculate the value of the share assuming no growth ie A/i
7.3/0.105 = 69.52
2.12/0.08 = 26.5
1.9/0.12 = 15.83
Now calculate the growth component,
80 – 69.52 = 10.48
39 – 26.5 = 12.5
27.39 – 15.83 = 11.56
So BKKQ has the biggest growth component.