If you look at stock prices over any year, you will find a high and low stock pr

Question

If you look at stock prices over any year, you will find a high and low stock price for the year. Instead of a single benchmark PE ratio, we now have a high and low PE ratio for each year. We can use these ratios to calculate a high and a low stock price for the next year. Suppose we have the following information on a particular company:

Year 1 Year 2 Year 3 Year 4
High price $ 99.90 $ 123.50 $ 132.90 $ 149.53
Low price 74.73 90.84 71.52 118.05
EPS 9.18 10.93 12.01 13.40

Earnings are projected to grow at 5 percent over the next year.

What is your high target stock price over the next year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

High target stock price $

What is your low target stock price over the next year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Low target stock price $

Explanation / Answer

Here is what I solved before, please modify the figures as per your question. Please let me know if you have further questions. Ifthis helps then kindly rate 5-stars.

If you look at stock prices over any year, you will find a high and low stock price for the year. Instead of a single benchmark PE ratio, we now have a high and low PE ratio for each year. We can use these ratios to calculate a high and a low stock price for the next year. Suppose we have the following information on a particular company:

Year 1 Year 2 Year 3 Year 4
High price $ 98.20 $ 121.80 $ 131.20 $ 147.83
Low price 73.03 89.14 69.82 116.35
EPS 7.48 9.23 10.31 11.70

Earnings are projected to grow at 6 percent over the next year.

What is your high target stock price over the next year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

High target stock price $

What is your low target stock price over the next year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Low target stock price $

Answer

(1+.06)*standard deviation of high price=high target price-$147.83
high target price=163.47
similarly low target price=131.99

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