1 Nofal Corporation will pay a $3.65 per share dividend next year. The company p
ID: 2659276 • Letter: 1
Question
1 Nofal Corporation will pay a $3.65 per share dividend next year. The company pledges to increase its dividend by 5.1 percent per year, indefinitely.
Round your answer to 2 decimal places (e.g., 32.16).
What is the current stock price?
2 The Sleeping Flower Co. has earnings of $1.75 per share
If the benchmark PE for the company is 18, how much will you pay for the stock?
What is the current stock price?
If the benchmark PE for the company is 21, how much will you pay for the stock?
What is the current stock price?
Round your answer to 2 decimal prices (e.g., 32.16)
A. Requirement 1:If the benchmark PE for the company is 18, how much will you pay for the stock?
What is the current stock price?
B .Requirement 2:
If the benchmark PE for the company is 21, how much will you pay for the stock?
What is the current stock price?
Explanation / Answer
let required rate of return is 12%
current stock price = 3.65/(.12-.051) = $52.89
A) P/E = P/1.75 = 18
P = 1.75*18 = $31.5
B)
P = 1.75*21 = $36.75
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