3. If a stock is currently priced at $40 per share and the firm’s current earnings...
3. If a stock is currently priced at $40 per share and the firm’s current earnings per share is $5, what price would you pay if you forecast new earnings per share to be $6.00 and you require a rate of return for the risk taken at 13%?
Homework Answers
| Calculation of price per share you would pay if EPS is $6 and required rate of return is 13% | ||||||||
| Price per share you would pay = Forecasted EPS / Required rate of return | ||||||||
| Price per share you would pay = $6 / 13% | ||||||||
| Price per share you would pay = $46.15 | ||||||||
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