Question

The Perfect Rose Co. has earnings of $2.30 per share. The benchmark PE for the company is 16. a. What stock price would you consider appropriate

Answer 1

a.$36.80

b. $43.70

Step-by-step explanation:

a. Calculation to determine What stock price would you consider appropriate

Using this formula

P= Benchmark PE ration x EPS

Let plug in the formula

P=16($2.30)

P=$36.80

Therefore What stock price would you consider appropriate is $36.80

b. Calculation to determine the stock price if the benchmark PE were 19

Using this formula

P= Benchmark PE ration x EPS

Let plug in the formula

P=19($2.30)

P= $43.70

Therefore the stock price if the benchmark PE were 19 will be $43.70