Question: You are trying to put a value on the common stock of LMO, Inc. Comparable firms in the same industry have an average P/E =19.

You are trying to put a value on the common stock of LMO, Inc. Comparable firms in the same industry have an average P/E =19. Comparable firms also have an average dividend yield = 1.6%.

a. LMOs EPS = $3.77. What is the stock value using P/E ratio?

b. LMO pays 25% of its earnings out as cash dividends. Using the dividend yield, what is the stock value?

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