Exhibit 14.2
Use the Information Below for the Following Problem(S)
Modular Industries currently has a 16% annual growth rate while the market average is 6 percent. The market multiple is 10.
-Refer to Exhibit 14.2.Determine the P/E ratio for Modular Industries assuming Modular can maintain its superior growth rate for the next 8 years.
A) 6.4
B) 20.5
C) 16.5
D) 23.8
E) 29.5

Question

Quizplus · Accepted Answer

ln (X)= 8 ln (1.16/1.06)
ln (X)= 8 ln (1.094)
ln (X)= 8 (.090)= 0.72 X = 2.05
The P/E would be 10 × 2.05 = 20.5

Exhibit 14.2 Use the Information Below for the Following Problem(S)