Firms recent earnings per share and dividend per share

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Suppose that a firm’s recent earnings per share and dividend per share are $3.15 and $2.60, respectively. Both are expected to grow at 6 percent. However, the firm’s current P/E ratio of 27 seems high for this growth rate. The P/E ratio is expected to fall to 23 within five years. Compute the dividends over the next five years. (Do not round intermediate calculations and round your final answers to 3 decimal places.) Dividends Years First year $ Second year $ Third year $ Fourth year $ Fifth year $ Compute the value of this stock price in five years. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Stock price $ Calculate the present value of these cash flows using an 8 percent discount rate. (Do not round intermediate calculations and round your final answer to 2 decimal places.) Present value $

Reference no: EM131045661

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