A company's 1993 earnings per share (EPS) were reported as $2.40, while the dividends per share were $1.06. Over the preceding five years, the earnings experienced a 7.5% annual growth rate, with a projected long-term growth rate of 6% commencing in 1994. The stock had a beta of 1.05 and traded at a valuation of ten times earnings. Additionally, the treasury bond rate stood at 7%.

What is your estimate of the P/E ratio for this company?

Answer rating: 100% (QA)

Answer Solution I Earnings per share are the ratio computed by dividing the profit after tax of an ... View the full answer