Investors expect net income to decline each year

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Reference no: EM13911616

Ironore Limited is an iron mining company whose mines are slowly being depleted (i.e., little by little, the amount of iron ore available in the mine is declining as the ore is extracted each year). Therefore, investors expect Ironore’s Net Income to decline each year by 2%. Ironore’s most recent Net Income = $2 million, and there are 500,000 shares of Ironore common stock outstanding. Ironore pays out all of its Net Income as dividends to its shareowners. What is your estimate of Ironore’s Price/Earnings ratio (i.e., ratio of stock price to earnings per share)? Assume investors require a minimum rate of return = 10% on an investment in Ironore stock.

Reference no: EM13911616

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