If a company has a current stock price of $60, an EPS of $2.50/share; EPS growth rate of 20% and the investors rate of return is 18%, calculate the cash cow price.
A) $13.09
B) $13.49
C) $13.89
D) $14.29
E) $14.69

Question

Quizplus · Accepted Answer

The cash cow price can be calculated using the formula: Cash Cow Price = EPS * (1 + g) / (r - g), where EPS is the earnings per share, g is the growth rate, and r is the required rate of return. Plugging in the values: Cash Cow Price = 2.50 * (1 + 0.20) / (0.18 - 0.20) = 2.50 * 1.20 / (-0.02) = $13.89.

If a Company Has a Current Stock Price of $60