If a company has a current stock price of $45, an EPS of $3/share; EPS growth rate of 10% and the investors rate of return is 15%, calculate the cash cow price.

Question

Quizplus · Accepted Answer

The cash cow price can be calculated using the formula: Cash Cow Price = EPS / Required Rate of Return. Here, EPS is $3 and the required rate of return is 15% or 0.15. Therefore, Cash Cow Price = $3 / 0.15 = $20.

If a Company Has a Current Stock Price of $45