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There a is pharmaceutical company that does not pay any dividend payments. The risk structure and...

There a is pharmaceutical company that does not pay any dividend payments. The risk structure and other features of company is very similar to those of Merck. If you’re expecting this company to announce $1.25 earnings next year, what will be the stock price next year?
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Answer #1

PE Ratio of Merck = 23.23

Earning of Pharmaceutical Company next year = $1.25

So,

Price of Pharmaceutical Company next year = 23.23(1.25)

Price of Pharmaceutical Company next year = $29.04

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