{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# 13.5.1 - (PE = MKP/EPS If you expect the current earnings...

This preview shows page 1. Sign up to view the full content.

NAME: . STUDENT #: . Class Test # 4 February 6, 2006 You are considering buying a stock that pays a \$1.50 dividend per share at the end of each year. Five years from now you believe that you could sell the stock for \$45.00. You require an 8% rate of return. QUESTION #1: Would you buy the stock today for \$30.00? Show calculations QUESTION #2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: (PE = MKP/EPS) If you expect the current earnings per share of \$1.00 to grow at a rate of 10% for five years and in 5 years trade at a price earnings ratio of 15 times earnings. It would pay the same \$1.50 dividend per share at the end of each year for five years. If you required the same 8% return would you buy the stock?...
View Full Document

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern