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AAPL paid $4.68 in dividend last year. The company has EPS of 15.6, ROE of 16%...

AAPL paid $4.68 in dividend last year. The company has EPS of 15.6, ROE of 16% and required 12.7% rate of return. What is the forward P/E ratio for AAPL?

Please do this in excel and show formulas.

Solutions

Expert Solution

D0   4.68  
EPS 0   15.6  
Dividend payout ratio = D0/EPS0=   0.3  
Retained earnings =1-DP=   0.7  
ROE   16%  
Required Return   12.70%  
Growth rate = ROE*Retained earning ratio=   11.20%  
      
Price of Stock = D0*(1+growth )/(Required Return - growth rate)      
   346.944  
      
EPS(1)=EPS0*(1+growth rate=   17.3472  
      
Forward PE Ratio= Price of stock/EPS1=   20  
       op

jeff jeffy answered 7 months ago
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