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What is the pe and terminal stock price

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Question: PE and Terminal Stock Price. In practice, a common way to value a share of stock when a company pays dividends is to value the dividends over the next five years or so, then find the "terminal" stock price using a benchmark PE ratio. Suppose a company just paid a dividend of $1.15. The dividends are expected to grow at 10 percent over the next five years. The company has a payout ratio of 40 percent and a benchmark PE of 21. What is the target stock price in five years? What is the stock price today assuming a required return of 11 percent on this stock?

Reference no: EM131731151

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