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3e Chapter08_solutions.xls

3e Chapter08_solutions.xls - PROBLEM 8-1 Given Sale price...

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PROBLEM 8-1 Given Comp #1 Comp #2 2121 Tartar Circle Sale price \$ 240,000.00 \$ 265,000.00 Square footage 2,240 2,145 3,000 Selling price/sq ft \$ 107.14 \$ 123.54 Time on the market 61 days 32 days Solution a. Average price per square foot \$ 115.34 Estimated Value \$ 346,028.97 b. Are there any unique features of the house: e.g., swimming pool or other special feature not available in the nearby houses. c. If the ask price was \$315,000, it is worth buying.

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Solution Legend = Value given in problem = Formula/Calculation/Analysis required = Qualitative analysis or Short answer required = Goal Seek or Solver cell = Crystal Ball Input = Crystal Ball Output
PROBLEM 8-2 Current year EPS \$ 2.50 Growth rate in EPS for next year 20% P/E Multiple (range) 10 15 Estimated Value (current EPS) \$ 25.00 \$ 37.50 Estimated Value (forward EPS) \$ 30.00 \$ 45.00 The fact that Garp's EPS are expected to grow more rapidly than the industry suggests that a forward P/E analysis would be appropriate. For Garp the use of next year's earnings in combination with the two comp P/E multiples raises the price for Garp significantly as we see above.

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Solution Legend = Value given in problem = Formula/Calculation/Analysis required = Qualitative analysis or Short answer required = Goal Seek or Solver cell = Crystal Ball Input = Crystal Ball Output

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