Sully Corp. currently has an EPS of $2.70, and the benchmark PE for the company

Question

Sully Corp. currently has an EPS of $2.70, and the benchmark PE for the company is 26. Earnings are expected to grow at 10 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%u2019s stock over the next year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Sully Corp. currently has an EPS of $2.70, and the benchmark PE for the company is 26. Earnings are expected to grow at 10 percent per year.

Explanation / Answer

a) current stock price = 2.70 * 26 = 70.2

b) target stock price = 70.2 * 1.1 = 77.22

c) implicit return on stock = (77.22-70.2/70.2) = 10%

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