I came across a problem where company A owns 25% of company B. Then they proceed to provide financial data for both firms, in particular, NI, Mkt cap, fx rates. one of the questions reads, “the implied P/E multiple of A without regard to B, is:” And the answer is: (mkt cap A - (25% x mkt cap B x fx))/ (NI A - (25% x NI B x fx)) This implies that the financial data for A already included the 25% ownership in B, no? It is a really subtle point that differentiates right from wrong. Do you see what I mean? Below are the questions for your reference: ----begin a company owns 25% of A company. Selected recent financial data for both firms follows: A, B Net income £16,000, €6,000 Market capitalization £275,000, €150,000 current exchange rate (£/€) 0.85 Average exchange rate (£/€) 0.80 7. the percentage of A’s value explained by its ownership of B is closest to: A. 10.9%. B. 11.6%. c. 13.6%. 8. the implied P/e multiple of A, without regard to B, is closest to: A. 16.1. B. 16.4. c. 17.2. 7. B Pro-rata share of B’s market cap / A’s market cap = (€150,000 × 25% × 0.85) / £275,000 = 11.6%. 8. B A’s implied value without B is £243,125, or £275,000 A market cap – £31,875 pro-rata share of B market cap (€150,000 × 25% × 0.85 current exchange rate). A’s net income without B is £14,800, or £16,000 A net income – £1,200 pro- rata share of B net income (€6,000 × 25% × 0.80 average exchange rate). Implied P/e = 16.4 (£243,125 A’s implied value without B / £14,800 A’s net income without B).