Suppose that CieanAir Co., a renewable energy stanup, currently has earnings of $10 per share and that Rina anticipates the earnings per share to grow by 4 percent per year. Using a mean industry PE ratio of 13 and the expected annual growth rate on the firm's existing earnings, the estimated stock price in three years is?

SUPPOse CleanAir Co. is expected to pay a dividend of $5 per share over the next three years, that Rina's required rate of return is 15 percent, and that she plans to sell the stock at the end of the three-year time period. Under these circumstances, using the adjusted dividend discount model, the value of the stock today is?

Answer rating: 100% (QA)

To estimate the stock price of CleanAir Co in three years we can use the pricetoearnings PE ratio an... View the full answer