An Analyst Has Determined That the Intrinsic Value of IBM

question 92

Multiple Choice

An analyst has determined that the intrinsic value of IBM stock is $80 per share using the capitalized earnings model.If the typical P/E ratio in the computer industry is 22,then it would be reasonable to assume the expected EPS of IBM in the coming year is ______.

• A) $3.63
• B) $4.44
• C) $14.40
• D) $22.50
• E) none of these

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Definitions:

Job-Related Criteria

The standards or qualifications required for performing a specific job, including skills, experience, and education.

Halo Effect

A cognitive bias where an individual's overall impression influences their judgment about specific traits or abilities.

Personal Opinion

An individual’s view or judgment formed about something, not necessarily based on fact or knowledge.

Contrast Error

A bias in performance appraisal that occurs when evaluations are influenced by comparing employees against each other instead of against objective standards.