PEGCOR has a P/E ratio of 19.7. Earnings per share are $ 1.37, and the expected...

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PEGCOR has a P/E ratio of 19.7. Earnings per share are $ 1.37, and the expected...

PEGCOR has a P/E ratio of 19.7. Earnings per share are $ 1.37, and the expected EPS 5 years from today are $ $2.03. Calculate the PEG ratio. (Refer to Chapter 4 if necessary.)

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Answer 1

Answer #1

Firstly we will calculate the growth rate of EPS:

g = (Expected EPS in 5 years / EPS today) ^ (1/t) - 1

= (2.03/1.37) ^ (1/4) - 1

= 10.33%

Formula: PEG Ratio = Price per Earnings / Annual EPS Growth

= 19.7 / 10.33

= 1.9071

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Answer 2

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