Tayco Corporation has just paid dividends of $3 per share.The earnings per share for the company was $4.If you believe that the appropriate discount rate is 15% and the long term growth rate in dividends is 6%,and earnings is 6%,the firm's P/E ratio is
A) 8.33
B) 33.33
C) 44.44
D) 11.11
E) None of the above

Question

Quizplus · Accepted Answer

$$P / E = \left[ \frac { \frac { 3 ( 1.06 ) } { 4 ( 1.06 ) } } { .15 - .06 } \right] = 8.33$$

Tayco Corporation Has Just Paid Dividends of $3 Per Share