Reference no: EM132777692

You have learned about the Price-Earnings (P-E) Multiple Approach, which is a relative approach for stock valuation, and are now ready to apply it to valuing a young but rapidly-growing publicly-held company in the biomedical sector that your company is considering to acquire. Your target company has been in business for three years since its IPO, and has not recorded a profit yet. As a newly-hired assistant to CFO, you are in charge of valuing your target company.

Problem 1: Discuss what problem(s) you might encounter in applying the P-E Multiple Approach and what alternative RELATIVE approach(es) you could use in place of the P-E Multiple Approach to value your target company.