Home / Questions / Suppose that a firmâ s recent earnings per share and dividend per share are $3 10 and $2 5...
Suppose that a firmâs recent earnings per share and dividend per share are $3.10 and $2.50, respectively. Both are expected to grow at 7 percent. However, the firmâs current P/E ratio of 26 seems high for this growth rate. The P/E ratio is expected to fall to 22 within five years.
Compute the dividends over the next five years.
Dividends | Years |
First year | $ |
Second year | $ |
Third year | $ |
Fourth year | $ |
Fifth year | $ |
Compute the value of this stock price in five years. (Do not round intermediate calculations and round your final answer to 2 decimal places.) |
Stock price | $ ?????? |
Calculate the present value of these cash flows using a 9 percent discount rate. (Do not round intermediate calculations and round your final answer to 2 decimal places. |
Present value | $ ?????? |
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