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Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
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Phoniex University
Oct-2001 - Nov-2016
28.       Stock Valuation and PE    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:
Â
|
 |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
|
High price |
$97.90 |
$121.50 |
$130.90 |
$147.53 |
|
Low price |
72.73 |
88.84 |
69.52 |
116.05 |
|
EPS |
7.18 |
8.93 |
10.01 |
11.40 |
Â
Earnings are projected to grow at 6 percent over the next year. What are your high and low target stock prices over the next year?
Â
Â
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