Calculate the justified values of trailing

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ABC Ltd has a required rate of return on equity of 11.46%. Its shares are currently selling for R41.50 and it has trailing 12-month earnings and dividends of R1.55 and R0.90, respectively. The market P/E, P/B and P/S are 29.4, 8.2 and 2.7 respectively. The profit margin on sales is 10.5%; and the treasury bond yield is 4.5% and the beta is 1.2.

Problem 1: Assuming that there is a 5% grow in dividends and earnings, calculate the justified values of trailing P/E.

Option 1: A. 8.98
Option 2: B. 9.43
Option 3: C. 6.83

Reference no: EM132944612

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