XYZ Corp. expects to have earnings of $500 million. XYZ also has 200 million shares of...
XYZ Corp. expects to have earnings of $500 million. XYZ also has 200 million shares of common stock outstanding. The average P/E ratio of similar stocks is 10. Given this information what do you estimate is a fair price for a share of XYZ common stock? Round your final answer to two decimals.
Homework Answers
Earnings per share=$500 million/200 million shares
=$2.5 per share
P/E ratio=stock price/EPS
Hence estimated price =2.5*10
=$25
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