Tayco Corporation has just paid dividends of $3 per share. The earnings per share for...
Tayco Corporation has just paid dividends of $3 per share. The earnings per share for the company was $4. If you believe that the appropriate discount rate is 15% and the long term growth rate in dividends is 6%, and earnings is 6%, the firm’s P/E ratio is
- 8.33
- 33.33
- 44.44
- 11.11
- None of the above
the answer is A, why?
Homework Answers
P/ Ratio = share price/ Earning Per share
The dividend is growing at a rate of 6%
3(1.06)
EPS = 4(1.06)/0.15-1.06
=
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