The Blooming Flower Co. has earnings of $3.68 per share.
a. If the benchmark PE for the company is 18, how much will you pay for the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b. If the benchmark PE for the company is 21, how much will you pay for the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
Q1)
This sum is based on the price earning (PE) ratio; where earning per share (EPS) is $3.68.
a.
PE ratio = Stock price / EPS
18 = Stock price / 3.68
18 × 3.68 = Stock price
Stock price = $ 66.24 (Answer)
b.
PE ratio = Stock price / EPS
21 = Stock price / 3.68
21 × 3.68 = Stock price
Stock price = $ 77.28 (Answer)