CA Final · Advanced Financial Management · Business Valuation
Sagar Foods Ltd has a profit after tax of ₹12 crore and 1.5 crore equity shares outstanding. Listed peers of similar size and growth trade at an average P/E multiple of 15. What is the value per share of Sagar Foods Ltd under the P/E approach?
The value is ₹120 per share. EPS is ₹12 crore divided by 1.5 crore shares, which is ₹8, and multiplying by the peer P/E of 15 gives ₹120. The P/E method applies the peer multiple to per-share earnings.
- A₹120Correct
- B₹180
- C₹1.88
- D₹0.53
Explanation
EPS = ₹12 crore / 1.5 crore shares = ₹8. Value per share = EPS × P/E = 8 × 15 = ₹120. The ₹180 option multiplies total PAT in crore by 15 and wrongly treats it as a per-share figure.
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