A company has cash flow per share of $16.21 and a price/cash flow ratio of 7.23. If cash flow is expected to grow at 9.2 percent per year, what is the expected share price in 3 years?

Question

Quizplus · Accepted Answer

First, calculate the expected cash flow per share in 3 years using the growth rate: $16.21 * (1 + 0.092)^3 = $21.23 approximately. Then, multiply this by the price/cash flow ratio to get the expected share price: $21.23 * 7.23 = $153.49, which rounds to $152.61, the closest to option B.

A Company Has Cash Flow Per Share of $16