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Question

Super Ltd sells at $40 per share, and its latest 12 month earnings were $8 per share, of which $3.20 per share

were paid as dividends:


a. What is Super's current P/E ration?



b. If Super's earnings are expected to grow by 10% per year, what is the projected price for next year assuming that the P/E ratio remains constant?


c. If you had a required rate of return of 15 %, expected the dividend payout ratio to remain constant, and dividends to grow at a rate of 10 %, what is the most you would you pay for a Super share? 

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