Net income for the previous year was $400,000, of which $280,000 was paid out in dividends. Dividends are expected to grow at a constant rate. The company has 200,000 shares outstanding and the book value of equity is $4,000,000. The appropriate P/E ratio for this type of company is 8. What is the expected stock price 5 years from now?
Net income for the previous year was $400,000, of which $280,000 was paid out in dividends. Dividends are expected to grow at a constant rate. The company has 200,000 shares outstanding and the book value of equity is $4,000,000. The appropriate P/E ratio for this type of company is 8. What is the expected stock price 5 years from now?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Net income for the previous year was $400,000, of which $280,000 was paid out in dividends. Dividends are expected to grow at a constant rate. The company has 200,000 shares outstanding and the book value of equity is $4,000,000. The appropriate P/E ratio for this type of company is 8.
What is the expected stock price 5 years from now?
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