Gnomes R Us just paid a dividend of $1.74 per share. The company has a dividend...
Gnomes R Us just paid a dividend of $1.74 per share. The company has a dividend payout ratio of 35 percent. If the PE ratio is 15.3 times, what is the stock price?
Multiple Choice
-
$9.32
-
$26.62
-
$76.06
-
$40.96
-
$58.51
Homework Answers
Ans. Option 3rd $76.06
*Working notes:
*Calculation of earnings per share:
Earnings per share = Dividends per share / Dividends payout ratio
= $1.74 / 35%
= $4.971 per share
*Calculation of stock price per share:
Stock price per share = Earnings per share * Price earnings ratio
= $4.971 * 15.3
= $76.06 per share
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