What will the price-earnings ratio at the end of year

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Reference no: EM13722272

Mobil Oil is currently selling at $41 per share. Based on the last 12 months figures, the price earnings ratio is 4 and the dividend yield is 8%. Dividends are expected to grow at an annual compound rate of 6% and earnings at a rate of 12%. The investors require rate of return is 16%. If an investor purchases Mobil Oil at the current price,

(a) What price must be recieved per share at the end of the three years in order to obtain the return of 16%

( b) What will the price-earnings ratio at the end of year 3 be? Given the price at the end of year 3 calculated in part (a)

Reference no: EM13722272

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