Chapter 8, Problem 28QP

Stock Valuation and PE [LO2] In the previous problem, we assumed that the stock had a single stock price for the year. However, if you look at stock prices over any year, you will find a high and low stock price for the year. Instead of a single benchmark PE ratio, we now have a high and low PE ratio for each year. We can use these ratios to calculate a high and a low stock price for the next year. Suppose we have the following information on a particular company over the past four years:

Earnings are projected to grow at 9 percent over the next year. What are your high and low target stock prices over the next year?