CFA Practice Question

There are 201 practice questions for this study session.

CFA Practice Question

Chris is working on relative valuation analysis for Toyota. Below is the data he gathered for this purpose:

Under the method of average return on equity, Toyota's EPS should be ______.
Correct Answer: $1.07

Average ROE method gives EPS = Current BVPS x Mean ROE = $5.24 x 0.204 = $1.07.

Note that historical EPS method gives the normalized figure around $5. Such huge difference in normalized earnings per share can be explained by a significant fall in book value per share during the last economic cycle.

User Contributed Comments 3

User Comment
katybo I think BVPS should be 4.08. P/BV is normally a trailing ratio and 2005 is an estimation...
MasterD If you used 4.08 then you would use the Ave ROE not including 2005's 10.8%
bbadger Excluding 2005 estimates, Mean ROE = 21.4666%, times 4.08 = 0.87584 EPS
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