You’re thinking about buying some stock in Affiliated Computer Corporation and want to use the P/E approach to value the shares. You’ve estimated that next year’s earnings should come in at about $4.00 a share. In addition, although the stock normally trades at a relative P/E of 1.15 times the market, you believe that the relative P/E will rise to 1.25, whereas the market P/E should be around 18.5 times earnings. Given this information, what is the maximum price you should be willing to pay for this stock? If you buy this stock today at $87.50, what rate of return will you earn over the next 12 months if the price of the stock rises to $110.00 by the end of the year?
Answer to relevant QuestionsAviBank Plastics generated an EPS of $2.75 over the last 12 months. The company’s earnings are expected to grow by 25% next year, and because there will be no significant change in the number of shares outstanding, EPS ...HighTeck has an ROE of 15%. Its earnings per share are $2.00, and its dividends per shareare $0.20. Estimate HighTeck’s growth rate. Briefly describe each of the following and note how it is computed and how it is used by technicians: a. Advance-decline lines b. Arms index c. On-balance volume d. Relative strength index e. Moving averages Describe the confidence index, and note the feature that makes it unique. Compute the Arms index for the S&P 500 over the following 3 days: Which of the 3 days would be considered the most bullish? Explain why.
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