Question
In: Finance
xyz'z eps for the current year is 2.25 and its current P/E ratio is 12. you...
xyz'z eps for the current year is 2.25 and its current P/E ratio is 12. you have forecasted that EPS will grow by 6% and the P/E will increase by 10%. What do you expect the price of a sharae of xyz's stock to be at the end of next year
Solutions
Expert Solution
Current year EPS = 2.25
Current P/E ratio = 12
Growth in EPS is 6% or 0.06
Expected EPS = Current EPS * (1 + Growth rate)
= $2.25 * (1+0.06)
= $2.25 * 1.06
= $2.385
Growth in PE ratio is 10% or 0.10
Expected P/E ratio = Current PE ratio* (1 + Growth rate)
= 12 * (1+0.10)
= 12 * 1.10
= 13.2
PE ratio = Price of share / EPS
13.2 = Price of share / $2.385
Price of share =13.2 * 2.385
= $31.482
The price at year end would be $31.482
jeff jeffy answered 2 years agoRelated Solutions
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