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Saved Chapter 8 Homework Domergue Corp. currently has an EPS of $3.76, and the benchmark PE for the company is 21. Earnings a
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Solution:-

(a)

Current stock price estimate= Current EPS*PE ratio = $3.76*21 = $78.96 per share

(b)

Target stock price after one year= Expected EPS next year*PE ratio = {$3.76*(1+5.1%)}*21 = $82.99 per share

(c)

Implied return on the company's stock during one year= (Target stock price after one year-current stock price)/Current stock price= (82.99-78.96)/78.96= 5.10%

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