An Analyst Has Determined That the Intrinsic Value of VM

question 17

Multiple Choice

An analyst has determined that the intrinsic value of VM CORP stock is $20 per share using the capitalized earnings model. If the typical P/E ratio in the computer industry is 25, then it would be reasonable to assume the expected EPS of VM CORP in the coming year is

• A) $3.63.
• B) $4.44.
• C) $0.80.
• D) $22.50.

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Definitions:

Tariff

A tax imposed by a government on imported goods or services to protect domestic industries or generate revenue.

Infant Industry

A new or emerging industry that may be protected by the government from international competition to allow it to grow.

Technological Efficiency

A measure of the effectiveness with which a technology converts inputs into outputs, often seen as achieving the maximum productivity with the least waste.

Silicon Chip

A small piece of silicon that contains integrated circuits used in electronic devices for processing or storage.