Pinnacle Financial Management projects that earnings per share for Valley Imports Inc.will increase from the current $1.75 per share to $2.00 next year.If Pinnacle recommends a P/E ratio of 12.5 for Valley Imports,what is the recommended forward looking price for the firm?
A)$21.88 per share
B)$25.00 per share
C)$23.44 per share
D)$6.25 per share

Question

Quizplus · Accepted Answer

The recommended forward-looking price is calculated by multiplying the projected earnings per share (EPS) by the recommended P/E ratio. Here, the projected EPS is $2.00 and the recommended P/E ratio is 12.5. Therefore, the calculation is $2.00 * 12.5 = $25.00 per share.

Pinnacle Financial Management Projects That Earnings Per Share for Valley