A company has a P/E ratio of 24 and a current EPS of $3.64. If the growth rate in earnings is expected to be 10.2 percent, what is the expected stock price in 3 years?

Question

Quizplus · Accepted Answer

To find the expected stock price in 3 years, first calculate the expected EPS in 3 years using the growth rate, then apply the P/E ratio. The expected EPS in 3 years = $3.64 * (1 + 10.2%)^3 = $4.87 approximately. The expected stock price = Expected EPS * P/E ratio = $4.87 * 24 = $116.88, which rounds to $116.91, option A.

A Company Has a P/E Ratio of 24 and a Current