Leslie Apparel has a current book value per share of $6.16 and current earnings per share of $1.13. The required return is 14 percent and the expected earnings growth rate is 4.5 percent. What is one share of this stock worth today?

Question

Quizplus · Accepted Answer

We can use the constant growth model to find the stock price. 
P0 = EPS1 / (r - g)
P0 = $1.13 / (0.14 - 0.045)
P0 = $9.51 
Therefore, one share of Leslie Apparel is worth $9.51 today.

Leslie Apparel Has a Current Book Value Per Share of $6.16