Earnings are expected to grow at 8.5 percent for the next year. What is the high

ID: 2706832 • Letter: E

Question

Earnings are expected to grow at 8.5 percent for the next year.

What is the high target stock price in one year? Do not round intermediate calculations. Round your answer to 2 decimal places

What is the low target stock price in one year? Do not round intermediate calculations. Round your answer to 2 decimal places

Year 1 Year 2 Year 3 Year 4 High price $89.38 $103.70 $125.54 $137.05 Low price 70.80 85.34 77.34 112.88 EPS 6.59 9.01 8.67 10.26

Given,

Earnings are expected to grow at 8.5 percent for the next year.

Year 5 earnings = $10.26 x 1.05 = $10.773

High P/E ration for year 4 = 137.05/10.26 = 13.357%

High Price for year 5 = $10.773 x 13.357 = $143.9025 = $143.90

Low P/E ration for year 4 = 112.88/10.26 = 11.0019 = $11

Low Price for year 5 = $10.773 x $11 = $118.50

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