A firm has a justified price-to-sales ratio of 2 times, a net profit margin of 5%, and a long term growth rate of 4%. The justified leading P/E (based on the Gordon growth model) is closest to: A. 34.8 B.38.5 C.40.0 D. 41.6
deep2002 Wrote: ------------------------------------------------------- > A firm has a justified price-to-sales ratio of 2 > times, a net profit margin of 5%, and a long term > growth rate of 4%. The justified leading P/E > (based on the Gordon growth model) is closest to: > A. 34.8 > B.38.5 > C.40.0 > D. 41.6 B: If P/S =2 and NPM = 0.05, P/E (trailing) = 2/0.05 = 40; If P/E (trailing) = 40 and g = 0.04, P/E (leading) = 40/(1+0.04) = 38.5
agree, B P/S = NPM* P/E(Trailing)
Yup B over here too
B…although it made a little nervous looking at this one
your all correct!