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What is zenith price-earnings ratio

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Zenith Propulsion, Inc. is expected to pay a dividend next year of $2.45 per share. Investors think that Zenith will continue to increase its dividend by 5% each year for the foreseeable future.

a. If the required rate of return on Zenith stock is 13%, then what is Zenith's stock price?

b. Investors expect Zenith to pay out 50% of its earnings as dividends. What is Zenith's price/earnings ratio? (Here P/E is defined as current price dividend by next year's earnings)

Reference no: EM132618427

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