Amax Inc. has a PE ratio of 25. It is expected to earn $1.50/ share in year 1. If investors expect a return of 15% per year on the stock, what is the premium for growth on the stock?

EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter7: Common Stock: Characteristics, Valuation, And Issuance
Section: Chapter Questions
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Amax Inc. has a PE ratio of 25. It is expected to earn
$1.50/ share in year 1. If investors expect a return of
15% per year on the stock, what is the premium for
growth on the stock?
Transcribed Image Text:Amax Inc. has a PE ratio of 25. It is expected to earn $1.50/ share in year 1. If investors expect a return of 15% per year on the stock, what is the premium for growth on the stock?
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