you are estimating the price earnings multiple to use to value paramount corporation 543584

You are estimating the price/earnings multiple to use to value Paramount Corporation by looking at the average price/earnings multiple of comparable firms. The following are the price/earnings ratios of firms in the entertainment business.

Firm

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P/E Ratio

Firm

P/E Ratio

Disney (Walt)

22.09

PLG

23.33

Time Warner

36

CIR

22.91

King World Productions

14.1

GET

97.6

New Line Cinema

26.7

GTK

26

A. What is the average P/E ratio?

B. Would you use all the comparable firms in calculating the average? Why or why not?

C. What assumptions are you making when you use the industry-average P/E ratio to value Paramount Communications?

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