Abbott Laboratories (ABT) engages in the discovery, development, manufacture, an
ID: 2771675 • Letter: A
Question
Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of a line of health care and pharmaceutical products. Below you will find selected information from Value Line. Use the Value Line estimated 2012 figures as the actual year-end figures for the company. The beta reported was .6 and the risk-free rate was 3.21 percent. Assume a market risk premium of 6 percent.
Using the P/E, P/CF, and P/S ratios, estimate the 2013 share price for Abbott Laboratories. Use the average stock price each year to calculate the price ratios. (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the "$" sign in your response.)
Please help with this question I cannot figure out the average stock price that connect wants me to use!!!!
Abbott Laboratories (ABT) engages in the discovery, development, manufacture, and sale of a line of health care and pharmaceutical products. Below you will find selected information from Value Line. Use the Value Line estimated 2012 figures as the actual year-end figures for the company. The beta reported was .6 and the risk-free rate was 3.21 percent. Assume a market risk premium of 6 percent.
Explanation / Answer
Average price in 2012 = (High price in 2012 + low price in 2012)/2
(57.4+43.7)/2 = 50.55 per share
Return on common equity reported in 2013 is $50.55.
P/E ratio = price per share/ Earnings per share
= 50.55 /5.35
= 9.45
P/CF ratio = price per share/ cash flow per share
= 50.55/7.30
=6.92
P/S ratio = Price per share/ Sales per share
=50.55/21.05
= 2.40