Zorba's Is a Small Chain of Restaurants Whose Stock Is

Zorba's is a small chain of restaurants whose stock is not publicly traded. The average P/E ratio for similar restaurant chains is 16.5; the P/E ratio for the S&P 500 Index is 15.2. This year's earnings were $1.21 per share and next year's earnings are forecasted at $1.46 per share. A reasonable price for a share of Zorba's stock is

A) $24.
B) $20.
C) $18.
D) $16.

Correct Answer:

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