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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. High price Low price EPS Year 1 $ 85.90 68.52 a. High target price Low target price Year 2 $95.66 80.18 8.89 Year 3 $116.78 83.70 8.55 Year 4 $ 128.77 106.40 10.14 Earnings are expected to grow at 6 percent over the next year. a. What is the high target stock price over the next year? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What is the low target stock price over the next year? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

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. High price Low price EPS Year 1 $ 85.90 68.52 a. High target price Low target price Year 2 $95.66 80.18 8.89 Year 3 $116.78 83.70 8.55 Year 4 $ 128.77 106.40 10.14 Earnings are expected to grow at 6 percent over the next year. a. What is the high target stock price over the next year? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What is the low target stock price over the next year? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

Financial Reporting, Financial Statement Analysis and Valuation
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter14: Valuation: Market-based Approach
Section: Chapter Questions
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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: High price Low price EPS Year 1 $ 85.90 68.52 6.47 Year 2 Year 3 $95.66 $116.70 a. High target price. b. Low target price 80.18 8.89 83.70 8.55 Year 4 $128.77 106.40 10.14 Earnings are expected to grow at 6 percent over the next year. a. What is the high target stock price over the next year? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What is the low target stock price over the next year? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
Transcribed Image Text: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: High price Low price EPS Year 1 $ 85.90 68.52 6.47 Year 2 Year 3 $95.66 $116.70 a. High target price. b. Low target price 80.18 8.89 83.70 8.55 Year 4 $128.77 106.40 10.14 Earnings are expected to grow at 6 percent over the next year. a. What is the high target stock price over the next year? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16. b. What is the low target stock price over the next year? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.
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