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Compute the value of this stock price in five years

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Reference no: EM132505492

Suppose that a firm's recent earnings per share and dividend per share are $3.30 and $2.90, respectively. Both are expected to grow at 6 percent. However, the firm's current P/E ratio of 30 seems high for this growth rate. The P/E ratio is expected to fall to 26 within five years.

Question 1: Compute the dividends over the next five years

Question 2: Compute the value of this stock price in five years

Question 3: Calculate the present value of these cash flows using an 8 percent discount rate.

Reference no: EM132505492

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