Suppose That the Average P/E Multiple in the Oil Industry

question 59

Multiple Choice

Suppose that the average P/E multiple in the oil industry is 22. Exxon is expected to have an EPS of $1.50 in the coming year. The intrinsic value of Exxon stock should be

• A) $33.00.
• B) $35.55.
• C) $63.00.
• D) $72.00.
• E) None of the options are correct.

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Definitions:

Mean

The average of a set of numbers, calculated by dividing the sum of these numbers by the count of numbers in the set.

Standard Deviation

A tool for assessing the scope of variation or dispersion among a series of figures.

Exponentially Distributed

Describes the time between events in a process in which events occur continuously and independently at a constant average rate.

Parameter λ

A symbol often used to denote a specific parameter in mathematical or statistical expressions, such as the rate parameter in an exponential distribution.