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LOS l: Calculate and explain the use of price multiples in determining terminal value in a multi-stage discounted cash flow (DCF) model.
Q1. Precision Tools is expected to have earnings per share (EPS) of $5.00 per share in five years, a dividend per share of $2.00, a cost of equity of 12%, and a long-term expected growth rate of 5%. What is the terminal trailing price-to-earnings (P/E) ratio in five years?
A) 7.14.
B) 9.00.
C) 6.00.
Q2. A common price to earnings (P/E) based method for estimating terminal value in multi-stage models is the:
A) P/E to growth (PEG) approach.
B) dividend yield approach.
C) fundamentals approach.
Q3. Industrial Light is expected to have earnings per share (EPS) of $5.00 per share in five years, a dividend per share of $2.50, a cost of equity of 12%, and a long-term expected growth rate of 5%. What is the terminal trailing price-to-earnings (P/E) ratio in five years?
A) 3.75.
B) 7.50.
C) 7.14. | 
发表于 2009-3-9 17:17
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