Suppose that in July 2013, Nike Inc. had EPS of $2.47 and a book value of equity

Question

Suppose that in July 2013, Nike Inc. had EPS of $2.47 and a book value of equity of $12.62 per share Average Maximum Minimum 29.84 +136% 62% Price Book 2.44 +70% -8340 Enterprise Value Sales 1.12 Enterprise Value EBITDA 9.76 + 86% -48% 34% a. Using the average P/E multiple from the table above, estimate Nike's share price b. What range of share prices do you estimate based on the highest and lowest P/E multiples in the table above? c. Using the average price to book value multiple in the table above, estimate Nike's share price d. What range of share prices do you estimate based on the highest and lowest price-to-book value multiples in the table above?

Explanation / Answer

Answer A Nike price based on average P/E Average P/E×nike EPS Nike price based on average P/E 29.84×2.47 Nike price based on average P/E 73.7048 Answer B MaximumP/E (1+1.36)×29.84 MaximumP/E 70.4224 Maximum price 2.47×70.4224 Maximum price 173.9433 Minimum P/E =29.84×(1-.62) Minimum P/E 11.3392 Minimum price =2.47×11.3392 Minimum price= 28.00782 Answer c Nike price based on average P/B Average P/B×Book value per share Nike price based on average P/B 2.44×12.62 Nike price based on average P/B= 30.7928 Answer D MaximumP/B= (1+.7)×2.44 Maximum=P/B 4.148 Maximum Price =4.148×12.62 Maximum Price =52.34776 Minimum P/B =(1-.63)×2.44 Minimum P/B= 0.9028

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