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What is the value of a private firm that had net income of $550,000 last year assuming you have identified a comparable publicly traded peer that has a P/E ratio of 22?

Respuesta :

jepessoa

Answer:

$12,100,000

Explanation:

the value of the private firm = net income x P/E ratio = $550,000 x 22 = $12,100,000

The price to earnings (P/E) ratio measures the price of the outstanding stocks relative to the annual net income of the corporation. E.g. price of outstanding stocks = $40 million, annual net income $2 million, the P/E ratio = $40 million / $2 million = 20

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