Walmart (WMT) recently earned a profit of $3.13 per share and has a P/E ratio of 14.22. The dividend has been growing at a 12.5 percent rate over the past few years. If this growth continues, what would be the stock price in five years if the P/E ratio remained unchanged? What would the price be if the P/E ratio declined to 10 in five years?
A) $6.08, $5.04 respectively
B) $72.22, $50.40 respectively
C) $80.20, $56.40 respectively
D) $86.46, $60.80 respectively

Question

Quizplus · Accepted Answer

The correct answer is C. The stock price in five years can be calculated using the formula:Stock price = Earnings per share * P/E ratioIf the P/E ratio remains unchanged, the stock price in five years would be:Stock price = $3.13 * 14.22 = $44.46If the P/E ratio declines to 10 in five years, the stock price would be:Stock price = $3.13 * 10 = $31.30

Walmart (WMT) Recently Earned a Profit of $3