Sparrow Corp. currently has an EPS of $3.75, and the benchmark PE for the company is 18.

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Sparrow Corp. currently has an EPS of $3.75, and the benchmark PE for the company is 18. Earnings are expected to grow at 6.5 percent per year.

a. What is your estimate of the current stock price?

b. What is the target stock price in one year?

c. Assuming the company pays no dividends, what is the implied return on the company’s stock over the next year? What does this tell you about the implicit stock return using PE valuation?

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Corporate Finance Core Principles And Applications

ISBN: 9781260571127

6th Edition

Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan

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Question Posted: Nov 13, 2020 04:25 AM

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Sparrow Corp. currently has an EPS of $3.75, and the benchmark PE for the company is 18.

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a Using the equation to calculate the price of a share of stock with the P...View the full answer

Corporate Finance Core Principles And Applications

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