Use the p-e approach to value the shares

Assignment Help Financial Management

Reference no: EM132042146

You're thinking about buying some stock in Affiliated Computer Corporation and want to use the P/E approach to value the shares. You've estimated that next year's earnings should come in at about $4.58 a share. In addition, although the stock normally trades at a relative P/E of 1.26 times the market, you believe that the relative?P/E will rise to 1.41 whereas the market P/E should be around 19.1 times earnings. Given this information, what is the maximum price you should be willing to pay for this stock. If you buy this stock today at $117.41, what rate of return will you earn over the next 12 months if the price of the stock rises to $148.81 by the end of the year? (Assume that the stock doesn't pay any dividends.)

The maximum price you should be willing to pay for this stock is (Round to the nearest cent.)

The rate of return over the next 12 months is. (Round to two decimal places.)

Reference no: EM132042146

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