Calculate the actual and justified P-E-P-B and P-S ratios

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Reference no: EM132018065

1) Calculate the actual & justified P/E, P/B, and P/S ratios using the numbers given below and provide your investment recommendation on this stock

Stock price $21 .00

EPS $1 .00

Dividends per share $0 .60

Book value of equity per share $5 .40

Sales per share $7 .50

ROE 20 .0%

Required return on stock 12 .0%

2) A Company is expected to pay a dividend of $2 in year 1, a dividend of $3 in year 2, and a dividend of $4 in year 3. After year 3, dividends are expected to grow at the rate of 7% per year. An appropriate required return for the stock is 12%. Using the multistage DDM, the stock should be worth __________ today.

Reference no: EM132018065

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