A compay is expected to have earnings of $1.26 per share in one year, $1.75 per share in two years, $2.51 per share in three years, and $2.96 in four years. The dividend payout ratio is also expected to remain at 40% over the next four years. The lagging P/E ratio is expected to increase up to 25 in three years. If the required rate of return is 10%, what is a fair value for this stock today?

Answer rating: 100% (QA)

To determine the fair value of the stock today we need to calculate the present value of the expecte... View the full answer