Po= 9 where you have assumed a constant annual growth rate of earnings, g, which you...

 

 

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Po= 9 where you have assumed a constant annual growth rate of earnings, g, which you have esti- mated to be equal to 5%. Citi's P/E ratio four years ago (i.e. P-1) was equal to 5. Assuming that Citi's growth has not changed (i.e. g is the same today as it was 4 years ago) and using the same growing perpetuity formula, at what price should you sell your Citi stock today if you plan to earn the same rate of return as you've expected four years ago? Po= 9 where you have assumed a constant annual growth rate of earnings, g, which you have esti- mated to be equal to 5%. Citi's P/E ratio four years ago (i.e. P-1) was equal to 5. Assuming that Citi's growth has not changed (i.e. g is the same today as it was 4 years ago) and using the same growing perpetuity formula, at what price should you sell your Citi stock today if you plan to earn the same rate of return as you've expected four years ago?