The current price of Parador Industries stock is $78 per share. Current earnings

Question

The current price of Parador Industries stock is $78 per share. Current earnings per share are $5.1, the earnings growth rate is 4 percent, and Parador does not pay a dividend. The expected return on Parador stock is 22 percent.

Calculate the earning per share one-year ahead. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Calculate the P/E ratio one-year ahead. (Round your answer to 2 decimal places.)

The current price of Parador Industries stock is $78 per share. Current earnings per share are $5.1, the earnings growth rate is 4 percent, and Parador does not pay a dividend. The expected return on Parador stock is 22 percent.

Explanation / Answer

1. Calculate the earning per share one-year ahead

Earning per share today = $5.1

Earning growth in one year = 4%

So EPS one-year ahead = 5.1*1.04 = $5.3

2

Market price one-year ahead = 78*1.22 = $ 95.16.

P/E Ratio = Market price per share / Earning per share

so P/E Ratio = 95.16/5.3 = 17.95

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