A company is expected to have earnings of $3.55 per share next year, $4.16 in two years, and $5.34 in three years. The dividend payout ratio is expected to remain at 30% over the next three years. You estimate the risk-free rate to be 5% per year and the expected market risk premium to be 5% per year. In two years, you expect the lagging PE ratio to be 24. The beta of the stock is 0.9. What would be an appropriate estimate of the stock price today?

Answer rating: 100% (QA)

The stock price today is the Present Value of Future Cash flows ie Present val... View the full answer