What is your estimate of the current stock price? ( Do not round intermediate ca

Question

What is your estimate of the current stock price? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

What is the target stock price in one year? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)

Assuming that the company pays no dividends, what is the implied return on the company's stock over the next year? (Do not round intermediate calculations. Round your answer to 1 decimal place (e.g., 32.2).)

Sully Corp. currently has an EPS of $2.58, and the benchmark PE ratio for the company is 24. Earnings are expected to grow at 7.5 percent per year.

Explanation / Answer

1) What is your estimate of the current stock price?

Using Below formula we can find the current stock price

P/E ratio = Stock price / Earnings Per share (EPS)

2) What is the target stock price in one year?

Using the same formula for PE ratio we will consdider the EPS to grow by 7.5 percent per year while keeping the PE ratio constant we can find the target stock price in one year

3) Assuming that the company pays no dividends, what is the implied return on the company's stock over the next year?

Using the below formula we can calculate the implied return oncompany's stock over the next year

Stock Return = [(P1 - P0 ) + D ] / P0

Where

P0 = Initial Stock Price = $61.92

P1 = Ending Stock Price ( After One Year)

D = Dividends = 0 as given

We have Below Calculation

Particulars E EPS ($) 2.58 PE PE Ratio 24 P Stock Price ($) ( E X PE) 61.92

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.