This item represents your estimate of the Price/Earnings Ratio prevalent for this business in each forecast period. A Price/Earnings Ratio is calculated as follows:
Estimated Stock Price
Earnings Per Share (v6125.00)
where Earnings Per Share (v6125) is calculated as:
Income Available for Common Shareholders (v1850.00)
No. of Common Shares: Wtd. Avg. (v3410.00)
The Residual Value is calculated by multiplying this number by adjusted Income Available for Common Shareholders (v1850). It is used in the Price/Earnings Residual Value method (v5200).
Adding debt to the estimated market value of the equity to arrive at the total value of the company is recommended, because the value is being discounted by the cost of capital (cost of debt and equity).