You notice that Coca-Cola has a stock price of $ 40.64 and EPS of $ 1.99. Its competitor PepsiCo has EPS of $ 4.15. But, Jones Soda, a small batch Seattle-based soda producer has a P/E ratio of 33.3. Based on this information, what is one estimate of the value of a share of PepsiCo stock?

The estimated Value of Share of PepsiCo stock will be $20 x $4.15 = $83.

Explanation:

Going by its Peer Average

Coca-Cola P/E ratio = $40.64 divided by $1.99 = $20.42

The Seattle based Soda producer had $33.3, this is very likely as it would incur less Marketing Costs among other Costs compared to Pepsico and Coca-Cola

Very likely Pepsico will be about $20 on average considering the size of its business and costs of doing Business just like its Peer Coca-Cola.

Therefore the estimated Value of Share of PepsiCo stock will be $20 x $4.15 = $83.

PepsiCo's Share Price=$84.74

Explanation:

For Coca-Cola that is comparable to PepsiCo,we can begin the analysis by calculating Coca-Cola P/E ratio can be computed thus"

Coca-Cola P/E's ratio=Stock price/Earnings per share

stock price=$40.64

EPS=$1.99

Coca-Cola's P/E ratio=$40.64/$1.99

Coca-Cola's P/E ratio=$20.42

Using the Coca-Cola's P/E ratio as a proxy for Pepsi-Co the estimate of the value of a share of PepsiCo is calculated as follows:

Coca-Cola P/E's ratio=PepsiCo's Share Price/ PepsiCo's Earnings per share

PepsiCo's EPS=$4.15

$20.42=PepsiCo's Share Price/$4.15

PepsiCo's Share Price=$20.42*$4.15

PepsiCo's Share Price=$84.74

Jones Soda's P/E ratio cannot be used as a proxy for PepsiCo as PepsiCo is bigger in size than Jones Soda.

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation:

answer; the correct answer should be (demonstrations); good luck