Ramsay Corp. currently has an EPS of $2.35, and the benchmark PE for the company
ID: 2644830 • Letter: R
Question
Ramsay Corp. currently has an EPS of $2.35, and the benchmark PE for the company is 21. Earnings are expected to grow at 7 percent per year.
What is your estimate of the current stock price? (Round your answer to 2 decimal places. (e.g., 32.16))
What is the target stock price in one year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Assuming the company pays no dividends, what is the implied return on the company
Ramsay Corp. currently has an EPS of $2.35, and the benchmark PE for the company is 21. Earnings are expected to grow at 7 percent per year.
Explanation / Answer
Answer:
a. Current stock price = EPS * P/E ratio = $2.35 *21 = $49.35
b. Target stock price = Expected EPS * P/E ratio = (2.35*107%) * 21 = $52.80
c. Implied return = Expected EPS / Expected Price = (2.35*107%) /$52.80 = 5%
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