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Next​ year, BHH Co. is expected to pay a dividend of $2.77 per share from earnings...

Next​ year, BHH Co. is expected to pay a dividend of $2.77 per share from earnings of $4.82 per share. The equity cost of capital for BHH is 11.6%. What should​ BHH's forward​ P/E ratio be if its dividend growth rate is expected to be 3.5%

for the foreseeable​ future?

The forward​ P/E ratio is?  (Round to two decimal​ places.)

Solutions

Expert Solution

Current share price = D1/(rs-g)

                              = 2.77 / (.116 - .035)

                              = 2.77 / .081

                               = $ 34.20 per share

Forward PE ratio = Current share price /estimated future earnings per share

                      = 34.20/ 4.82

                      = 7.10

jeff jeffy answered 6 months ago
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