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rate of return p/e rations

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1. Determining required rate of return.
A stock pays a dividend of $2.75. It's current price is $19.00.
The expected growth rate is 5%.
What is the required rate of return?

2. 2 Stage Growth Model
Given the following data calculate the price of the stock:
D0 = $1.75; n = 5 years; g1 = 20%; g = 5% ; rs = 10%

3. Relative Valuation
A stock has a P/E ratio of 20, and it's estimated that its earnings per share will be $5.00. Calculate the price of the stock.
A stock has a P/Sales ratio of 3. Sales per share is $16. Find the price of the stock.

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The expert determines the required rate of return.

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1. Determining required rate of return.
D0=$2.75
P0=$19.00.
g=5%.
Ke=D0*(1+g)/P0+g
=2.75*(1+5%)/19+5%=20.2%

2.
Given the following data calculate the price of the stock:
D0 = $1.75; n = 5 years; g1 = 20%; g = 5% ...

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