Using gordon model find implied growth rate

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XYZ tech is based in European Union. Share price of XYZ is traded at 40 euro per share. Company is paying dividends once a year. Expected dividend next year is about 2 euro per share. Return on equity is equal to 0.14.

Question 1.

Using Gordon model find implied growth rate of the company XYZ.

Question 2.

You are worrying that company might be overvalued. Forward P/E ratio in tech sector is about 20. Analysts (whom you trust) expect that earnings per share will be 3 euro per share. Use relative (multiples) valuation method to estimate "fair" share price. Compare your estimate to the actual share price and make a conclusion whether company is overvalued or no?

Reference no: EM133238764

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