Suppose that in July 2013, Nike Inc. had EPS of $2.48 and a book value of equity

Question

Suppose that in July 2013, Nike Inc. had EPS of $2.48 and a book value of equity of $12.63 per share. 29.84 + 136% -62% Price Book 2.44 + 70% -63% Enterprise Value Sales 1.12 +55% -48% Enterprise Value EBITDA 9.76 Average Minimum -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? a. Using the average P/E multiple from the table above, estimate Nike's share price Nike's share price for this case will be $1. (Round to the nearest cent.) b. What range of share prices do you estimate based on the highest and lowest P/E multiples in the table above? Range of prices: The highest price will be $. (Round to the nearest cent.) The lowest price will be $ Round to the nearest cent.)

Explanation / Answer

a) Share Price = P/E x EPS = 29.84 x 2.84 = $84.75

b) Highest Price = Highest P/E x EPS = 29.84 x (1 + 136%) x 2.84 = $200.00

Lowest Price = Lowest P/E x EPS = 29.84 x (1 - 62%) x 2.84 = $32.20

c) Share Price = P/B x BVPS = 2.44 x 12.63 = $30.82

d) Highest Price = 2.44 x (1 + 70%) x 12.63 = $52.39

Lowest Price = 2.44 x (1 - 63%) x 12.63 = $11.40

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