The Blooming Flower Co. has earnings of $3.68 per share.

a. If the benchmark PE for the company is 18, how much will you pay for the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

b. If the benchmark PE for the company is 21, how much will you pay for the stock? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Expert Solution

Q1)

This sum is based on the price earning (PE) ratio; where earning per share (EPS) is $3.68.

a.

PE ratio = Stock price / EPS

18 = Stock price / 3.68

18 × 3.68 = Stock price

Stock price = $ 66.24 (Answer)

b.

PE ratio = Stock price / EPS

21 = Stock price / 3.68

21 × 3.68 = Stock price

Stock price = $ 77.28 (Answer)

jeff jeffy answered 2 years ago

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