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You notice that​ Coca-Cola has a stock price of $ 40.68 and EPS of $ 2.04. Its competitor PepsiCo has EPS of $ 3.43. ​But, Jones​ Soda, a small batch​ Seattle-based soda producer has a​ P/E ratio of 35.2. Based on this​ information, what is one estimate of the value of a share of PepsiCo​ stock? g

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Answer:

Estimate Value of a share= $71.81

Explanation:

The value of a share can be determined using the price earning  ratio model. According to this model, the price of a share is estimated as the EPS of the company multiplied by a representative P/E ratio.

Value of share = EPS × P/E

The appropriate P/E ratio would be that of a similar operator in the same industry, in this case , Jones Soda.

Hence the estimate value of share =2.04 × 35.2=71.81

Estimate Value of a share= $71.81

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