The Sleeping Flower Co. has earnings of $1.75 per share. If the benchmark PE for
ID: 2770359 • Letter: T
Question
The Sleeping Flower Co. has earnings of $1.75 per share.
If the benchmark PE for the company is 18, how much will you pay for the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
If the benchmark PE for the company is 21, how much will you pay for the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Requirement 1:If the benchmark PE for the company is 18, how much will you pay for the stock? (Do not round intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16).)
Explanation / Answer
Price earning ratio = Market value price per share / Earnings per share requirement 1 PE Ratio 18 Earning per share 1.75 Market value per share = PE Ratio * Earning per share = 18 * 1.75 = 31.50 I will be willing to pay $ 31.50 requirement 2 PE Ratio 21 Earning per share 1.75 Market value per share = PE Ratio * Earning per share = 21 * 1.75 = 36.75 I will be willing to pay $ 36.75
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