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Option A is incorrect because it states that Delta has the higher trailing P/E multiple and lower current estimated P/E multiple, which is not the case.
The trailing P/E multiple is calculated by dividing the current market price per share by the earnings per share (EPS) of the previous year.
For Alpha Corp., the trailing P/E multiple would be:
Trailing P/E = Current price per share / Last year’s EPS = $57.32 / $3.82 = 15.01
For Delta Co., the trailing P/E multiple would be:
Trailing P/E = Current price per share / Last year’s EPS = $18.93 / $1.35 = 14.02
So, Alpha Corp. has the higher trailing P/E multiple of 15.01, compared to Delta Co.’s trailing P/E multiple of 14.02.
On the other hand, the current estimated P/E multiple is calculated by dividing the current market price per share by the estimated EPS for the current year.
For Alpha Corp., the current estimated P/E multiple would be:
Current estimated P/E = Current price per share / Current year’s estimated EPS = $57.32 / $4.75 = 12.06
For Delta Co., the current estimated P/E multiple would be:
Current estimated P/E = Current price per share / Current year’s estimated EPS = $18.93 / $1.40 = 13.52
Therefore, in terms of current estimated P/E multiple, Alpha Corp. has the lower P/E multiple of 12.06, compared to Delta Co.’s current estimated P/E multiple of 13.52.
So, option B is the correct answer, as it states that Alpha has the higher trailing P/E multiple and lower current estimated P/E multiple.
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