Question #25835

Sully Corp. currently has an EPS of $3.90, and the benchmark PE for the company is 38. Earnings are expected to grow at 10 percent per year.
a. What is your estimate of the current stock price? (Round your answer to 2 decimal places. (e.g., 32.16))
Current stock price $
b. What is the target stock price in one year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Target stock price $
c. Assuming the company pays no dividends, what is the implied return on the company’s stock over the next year? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))
Implied return of stock %

Expert's answer

Sully Corp. currently has an EPS of $3.90, and the benchmark PE for the

company is 38. Earnings are expected to grow at 10 percent per year.

a. What is your estimate of the current stock price? (Round your answer

to 2 decimal places. (e.g., 32.16))

Current stock price = $3.9*38 = $148.2

b. What is the target stock price in one year? (Do not round

intermediate calculations and round your final answer to 2 decimal places.

(e.g., 32.16))

Target stock price = 148.2*1.1 = $163.02

c. Assuming the company pays no dividends, what is the implied return on the

company’s stock over the next year? (Do not round intermediate calculations

and round your final answer to 2 decimal places. (e.g., 32.16))

Implied return of stock = (163.02 - 148.2)/148.2 = 10%

company is 38. Earnings are expected to grow at 10 percent per year.

a. What is your estimate of the current stock price? (Round your answer

to 2 decimal places. (e.g., 32.16))

Current stock price = $3.9*38 = $148.2

b. What is the target stock price in one year? (Do not round

intermediate calculations and round your final answer to 2 decimal places.

(e.g., 32.16))

Target stock price = 148.2*1.1 = $163.02

c. Assuming the company pays no dividends, what is the implied return on the

company’s stock over the next year? (Do not round intermediate calculations

and round your final answer to 2 decimal places. (e.g., 32.16))

Implied return of stock = (163.02 - 148.2)/148.2 = 10%

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