Essay: Review of Estimated Value with Market Multiple

Essay: Review of Estimated Value with Market Multiple
08/06/2011 Comments Off on Essay: Review of Estimated Value with Market Multiple Academic Papers on Business Studies,Sample Academic Papers admin

Sample Essay

The market multiple or P/E ratio is a good indicator of a company’s share value and earnings. It shows the relationship between the market price and earnings per share of a company. The P/E ratio based on the actual earnings per share and market price of shares is compared with the forecasted earnings per share and price per share. The actual earnings per share have been obtained from the financial statements included in the annual report of the company (Qantas).

The current market price per share of AUD 2.78 has been obtained from the Australian Securities Exchange website (Australian Securities Exchange). The table below indicates that the P/E ratio obtained from actual values is quite higher than the P/E ratio based on forecasted values. This indicates that though the share price estimated for the merger is quite lower than the current market price the P/E ratio is also lower as the estimated average earnings per share for the next three years are also quite low.

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