AviBank Plastics generated an EPS of $2.75 over the last 12 months. The company’s

earnings are expected to grow by 25% next year, and because there will be no
significant change in the number of shares outstanding, EPS should grow at about the
same rate. You feel the stock should trade at a P/E of around 30 times earnings. Use
the P/E approach to set a value on this stock

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Mam can know the process of the solution? I cant view the answer

To set a value on AviBank Plastics using the P/E approach, we need to follow these steps:

Step 1: Calculate the expected EPS growth rate for next year.
Given that the company's earnings are expected to grow by 25% next year, we can calculate the expected EPS growth rate as:
Expected EPS Growth Rate = 25%

Step 2: Calculate the estimated EPS for next year.
To estimate the EPS for next year, we need to add the expected growth rate to the current EPS. So,
Estimated EPS for next year = Current EPS + (Current EPS * Expected EPS Growth Rate)
Estimated EPS for next year = $2.75 + ($2.75 * 25%)
Estimated EPS for next year = $2.75 + $0.6875
Estimated EPS for next year = $3.4375

Step 3: Calculate the estimated stock price.
To calculate the estimated stock price, we need to multiply the estimated EPS for next year by the desired P/E ratio. So,
Estimated Stock Price = Estimated EPS for next year x P/E ratio
Estimated Stock Price = $3.4375 x 30
Estimated Stock Price = $103.125

Therefore, using the P/E approach, the estimated value for the AviBank Plastics stock would be $103.125.

To set a value on the stock using the P/E (Price-to-Earnings) approach, we need to calculate the estimated future earnings per share (EPS) and then multiply it by the P/E ratio.

Given that AviBank Plastics has generated an EPS of $2.75 over the last 12 months, we can expect the EPS to grow by 25% in the next year. Therefore, the estimated EPS for the next year would be:

Estimated Next Year EPS = Current EPS + (Current EPS * Growth Rate)
= $2.75 + ($2.75 * 0.25)
= $2.75 + $0.6875
= $3.4375

Next, we need to determine the appropriate P/E ratio. In this case, you feel that the stock should trade at a P/E of around 30 times earnings. So, the P/E ratio is 30.

To calculate the estimated future stock value using the P/E approach, we multiply the estimated EPS by the P/E ratio:

Estimated Stock Value = Estimated Next Year EPS * P/E Ratio
= $3.4375 * 30
= $103.125

Therefore, using the P/E approach, the estimated value of AviBank Plastics' stock is $103.125 per share.