New York Times Co. (NYT) recently earned a profit of $1.61 per share and has a P

Question

New York Times Co. (NYT) recently earned a profit of $1.61 per share and has a P/E ratio of 19.40. The dividend has been growing at a 9.25 percent rate over the past six years.

If this growth rate continues, what would be the stock price in five years if the P/E ratio remained unchanged? What would the price be if the P/E ratio increased to 26 in five years? (Round your answers to 2 decimal places.)

New York Times Co. (NYT) recently earned a profit of $1.61 per share and has a P/E ratio of 19.40. The dividend has been growing at a 9.25 percent rate over the past six years.

Explanation / Answer

Stock price = P/E * earnings

stock price = 19.40*1.61

stock price = 31.23

earnings in 5 years = 1.61*1.09255 = 2.51

price with new P/E = 26 * 2.51

price with new P/E = 65.15

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